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Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-08 · 548 added, 538 removed, 785 unchanged (58% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The objective of this section of the report is to provide a discussion and analysis, from management’s perspective, of the material information necessary to assess Farmer Mac's financial condition and results of operations for the quarter ended September 30, 2021.

Financial information included in this report is consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage Securities Corporation and Farmer Mac II LLC.

This discussion and analysis of financial condition and results of operations should be read together with:

(1) the interim unaudited consolidated financial statements and the related notes that appear elsewhere in this report;

and (2) Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC on February 25, 2021 (the "2020 Annual Report").

Updates to Critical Accounting Estimates

The objective of this section of the report is to provide a discussion and analysis, from management’s

perspective, of the material information necessary to assess Farmer Mac's financial condition and results

of operations for the quarter ended March 31, 2022.

Financial information included in this report is

consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage

Securities Corporation and Farmer Mac II LLC.

This discussion and analysis of financial condition and

results of operations should be read together with:

(1) the interim unaudited consolidated financial

statements and the related notes that appear elsewhere in this report;

and (2) Farmer Mac's Annual Report

on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 28, 2022

(the "2021 Annual Report").

FORWARD-LOOKING STATEMENTS

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Management's expectations for Farmer Mac's future necessarily involve assumptions, estimates, and the evaluation of risks and uncertainties.

Various factors or events, both known and unknown, could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including the factors discussed under "Risk Factors" in Part II, Item 1A of this report and in Part I, Item 1A of the 2020 Annual Report, as well as uncertainties about:

• the duration, spread, and severity of the COVID-19 pandemic and its effects on the business operations of agricultural and rural borrowers, the capital markets, and Farmer Mac's business operations;

• the actions taken to address the COVID-19 pandemic, including government actions to mitigate the economic impact of the pandemic, how quickly and to what extent normal economic and operating conditions can resume, the possibility of future disruptions to economic recovery caused by any further outbreaks, regulatory measures or voluntary actions to limit the spread of COVID-19, and the duration and efficacy of any restrictions that may be imposed;

Various factors or events, both known and unknown, could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the

forward-looking statements, including the factors discussed under "Risk Factors" in Part I, Item 1A of Farmer Mac's 2021 Annual Report, as well as uncertainties about:

• the availability to Farmer Mac of debt and equity financing and, if available, the reasonableness of rates and terms;

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trade policies, fluctuations in export demand for U.S.

agricultural products, supply chain disruptions, increases in input costs, labor availability, and volatility in commodity prices;

agricultural products, supply chain disruptions, increases in input costs, labor availability, volatility in commodity prices, and the effects of the conflict between Russia and Ukraine;

• the degree to which Farmer Mac is exposed to interest rate risk resulting from fluctuations in Farmer Mac's borrowing costs relative to market indexes;

• developments in the financial markets, including possible investor, analyst, and rating agency reactions to events involving government-sponsored enterprises, including Farmer Mac;

• the effect of any changes in Farmer Mac's executive leadership;

• other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather or fluctuations in agricultural real estate values.

• the effects of the Federal Reserve’s efforts to achieve monetary policy normalization and slow inflation;

• other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather, climate change, or fluctuations in agricultural real estate values;

• the public response to the ongoing COVID-19 pandemic, including the possibility of government actions to mitigate the pandemic and its effects, and any social or economic disruption that may be caused by any new COVID-19 variants or any further outbreaks.

Considering these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this report.

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Farmer Mac is a mission-focused, purpose-driven company determined to improve the economic opportunity in rural America by increasing the availability and affordability of credit.

As the nation’s secondary market for agricultural and rural infrastructure loans, we provide a broad array of financial solutions to lenders that support flexible low-cost financing to farmers, ranchers, agribusinesses, renewable energy projects, rural utilities, and other institutions.

Farmer Mac also serves as a critical investment tool for states, counties, municipalities, pension funds, banks, public trust funds, and credit unions by providing diversification in their investment portfolios, issuance structure flexibility, and a safe, competitive return on their investment dollars.

During third quarter 2021:

• we closed on a strategic acquisition that enhanced our operations by expanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios;

• we continued to operate effectively while nearly all employees worked remotely;

• we provided $2.5 billion in liquidity and lending capacity to lenders serving rural America;

• we maintained uninterrupted access to the debt capital markets and a strong capital position;

• we maintained strong liquidity in our investment portfolio well above regulatory requirements.

Farmer Mac’s performance during third quarter 2021 described in more detail in this report reflects the success of our continued focus on pursuing new channels and innovative ways to further our mission to help build a strong and vital rural America.

Farmer Mac also serves as a critical investment tool for entities such as states, counties, municipalities, pension funds, banks, public trust funds, and credit unions.

Farmer Mac offers those entities a variety of investment opportunities that may diversify their investment portfolios and provide the opportunity to earn a competitive return on their investment dollars.

Farmer Mac’s performance during first quarter 2022, described in more detail below, reflects the success of our continued focus on pursuing new channels and innovative ways to further our mission to help build a strong and vital rural America.

The discussion below of Farmer Mac's financial information includes "non-GAAP measures," which are measures of financial performance not presented in accordance with generally accepted accounting principles in the United States ("GAAP").

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For the Three Months Ended

September 30, 2021 June 30, 2021 September 30, 2020

March 31, 2022 December 31, 2021 March 31, 2021

(in thousands)

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Core earnings 25,761 30,027 25,911

The $1.2 million sequential decrease in net income attributable to common stockholders was primarily due to a $1.0 million after-tax increase in our provision for credit losses and a $0.9 million increase in

preferred stock dividends, which was partially offset by a $0.6 million after-tax increase in the fair value of undesignated financial derivatives due to fluctuations in long-term interest rates.

The $5.6 million year-over-year increase in net income attributable to common stockholders was due to an $8.2 million after-tax increase in net interest income, the absence of a $1.7 million after-tax loss on the retirement of preferred stock recorded in the comparable prior period, and a $0.7 million after-tax decrease in the provision for credit losses.

These factors were partially offset by a $2.0 million after-tax increase in operating expenses, a $1.4 million after-tax decrease in the fair value of undesignated financial derivatives due to fluctuations in long-term interest rates, and a $1.6 million increase in preferred stock dividends.

The $2.3 million sequential decrease in core earnings was primarily due to a $1.0 million after-tax increase in our provision for credit losses and a $0.9 million increase in preferred stock dividends.

Year-over-year core earnings were approximately equivalent because a $3.3 million after-tax increase in net effective spread and a $0.7 million after-tax decrease in the provision for credit losses, were partially offset by a $2.0 million after-tax increase in operating expenses, a $1.6 million increase in preferred stock dividends, and a $0.3 million after-tax decrease in guarantee fees.

The $11.2 million sequential increase in net income attributable to common stockholders was due to a $14.5 million after-tax increase in the fair value of undesignated financial derivatives and a $3.5 million after-tax increase in net interest income.

These factors were partially offset by the non-recurrence of the fourth quarter 2021 $5.2 million after-tax gain on sale of mortgage loans, a net change in our (release)/provision for credit losses of $1.1 million after tax, and a $0.7 million after-tax increase in operating expenses.

The $13.1 million year-over-year increase in net income attributable to common stockholders was due to a $9.3 million after-tax increase in the fair value of undesignated financial derivatives and a $6.8 million after-tax increase in net interest income.

These factors were partially offset by a $2.0 million after-tax increase in operating expenses and a $1.5 million increase in preferred stock dividends.

The $4.3 million sequential decrease in core earnings was due to the non-recurrence of the fourth quarter 2021 $5.2 million after-tax gain on sale of mortgage loans, a net change in our (release)/provision for credit losses of $1.1 million after tax, and a $0.7 million after-tax increase in operating expenses.

These factors were partially offset by a $2.8 million after-tax increase in net effective spread.

The $0.2 million year-over-year decrease in core earnings was due to the $2.0 million after-tax increase in operating expenses and the $1.5 million increase in preferred stock dividends.

These factors were partially offset by a $3.1 million after-tax increase in net effective spread.

For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

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For the Three Months Ended

September 30, 2021 June 30, 2021 September 30, 2020

March 31, 2022 December 31, 2021 March 31, 2021

(in thousands)

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Net effective spread % 0.97 % 0.94 % 0.97 %

Sequential net interest income, in both dollars and percentage, was approximately equivalent because there were no significant fluctuations in the composition of net interest income.

The $10.3 million year-over-year increase in net interest income was primarily due to a $4.5 million decrease in funding costs, a $2.9 million increase related to new business volume, and a $3.1 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated

financial derivatives).

In percentage terms, the year-over-year 0.16% increase was primarily attributable to a decrease of 0.06% in funding costs, an increase of 0.05% in net fair value changes from designated financial derivatives, and an increase of 0.03% in new business volume.

The $0.6 million sequential decrease in net effective spread was from a $1.3 million decrease attributable to an increase in non-GAAP funding costs and lower cash-basis interest income, partially offset by $0.7 million in new business volume.

In percentage terms, the decrease of 0.02% was primarily attributable to the decrease of 0.01% related to lower cash-basis interest income and the increase of 0.01% related to non-GAAP funding costs.

The $4.1 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $2.9 million from new business volume and a $1.0 million decrease in non-GAAP funding costs.

In percentage terms, the year-over-year increase of 0.03% was primarily attributable to new business volume.

The $4.5 million sequential increase in net interest income was primarily due to a $1.9 million increase related to net new business volume, a $1.4 million decrease in funding costs, and a $0.8 million increase in cash-basis interest income.

In percentage terms, the sequential 0.05% increase was primarily attributable to a decrease of 0.03% in funding costs, an increase of 0.01% in net new business volume, and an increase of 0.01% in net fair value changes from financial derivatives designated in hedge accounting relationships (designated financial derivatives).

The $8.6 million year-over-year increase in net interest income was primarily due to a $5.0 million increase from net new business volume, a $2.0 million increase in the fair value of designated financial derivatives, a $0.8 million increase in net coupon yields related to our acquisition, in third quarter 2021, of the loan servicing rights on a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios, and a $0.7 million increase in cash-basis interest income.

In percentage terms, the year-over-year 0.09% increase was primarily attributable to a decrease of 0.05% in funding costs and an increase of 0.03% in net fair value changes from designated financial derivatives.

The $3.5 million sequential increase in net effective spread in dollars was primarily due to an increase of $1.9 million from net new business volume, a $1.2 million decrease in non-GAAP funding costs, and a $0.8 million increase in cash-basis interest income.

In percentage terms, the sequential increase of 0.03% was primarily attributable to an increase of 0.01% in net new business volume and an increase of 0.01% in cash-basis interest income.

The $4.0 million year-over-year increase in net effective spread in dollars was primarily due to a $4.4 million increase from net new business volume, a $0.8 million increase in net coupon yields related to the acquisition of loan servicing rights referenced above, and a $0.7 million increase in cash-basis interest income.

These factors were partially offset by a $1.7 million increase in non-GAAP funding costs.

In percentage terms, net effective spread remained constant on a year-over-year basis.

For more information about Farmer Mac's use of net effective spread as a financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." For a reconciliation of net interest income to net effective spread, see Table 11 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."

Business Volume

Our outstanding business volume was $23.1 billion as of September 30, 2021, a net increase of $0.9 billion from June 30, 2021 after taking into account all new business, maturities, and paydowns on existing assets.

The net increase was primarily attributable to net increases of $499.2 million in the Institutional Credit line of business, $389.2 million in the Farm & Ranch line of business, and $37.4 million in the Rural Utilities line of business, partially offset by a net decrease of $4.2 million in the USDA Guarantees line of business.

Our outstanding business volume was $24.2 billion as of March 31, 2022, a net increase of $0.6 billion from December 31, 2021 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The net increase was primarily attributable to net increases of $0.5 billion in the Agricultural Finance line of business and $0.1 billion in the Rural Infrastructure Finance line of business.

For more information about Farmer Mac's business volume, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume."

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(in thousands)

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Capital in excess of minimum capital level required 488,730 486,810

The increase in capital in excess of the minimum capital level required was primarily due to the issuance of the Series G Preferred Stock in May 2021 and an increase in retained earnings.

The increase in capital in excess of the minimum capital level required was primarily due to an increase in retained earnings.

Credit Quality

The following table presents Farm & Ranch substandard assets, in dollars and as a percentage of the Farm & Ranch portfolio, for both on- and off-balance sheet assets as of September 30, 2021, June 30, 2021, and December 31, 2020:

Farm & Ranch Line of Business

The following table presents Agricultural Finance on-balance sheet loan purchase and off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities substandard assets, in dollars and as a percentage of the respective portfolio as of March 31, 2022 and December 31, 2021:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

September 30, 2021 $ 204,197 3.0 % $ 74,077 2.8 %

June 30, 2021 205,958 3.1 % 93,168 3.8 %

March 31, 2022 $ 181,303 2.6 % $ 34,516 1.2 %

December 31, 2021 185,758 2.7 % 60,922 2.1 %

Increase/(decrease) from prior quarter-ending $ (1,761) (0.1) % $ (19,091) (1.0) %

Increase/(decrease) from prior year-ending $ (4,455) (0.1) % $ (26,406) (0.9) %

The decrease of $1.8 million in on-balance sheet substandard assets during third quarter 2021 was primarily driven by credit upgrades during the quarter, particularly livestock.

The on-balance sheet Farm & Ranch portfolio grew by $176.5 million, which, when coupled with credit upgrades, caused the percentage of substandard assets to decrease.

The $19.1 million decrease in substandard assets in our off-balance sheet Farm & Ranch portfolio during third quarter 2021 was primarily due to credit upgrades in the livestock and crops portfolios during the quarter.

There was one substandard asset in the Rural Utilities portfolio as of both September 30, 2021 and June 30, 2021, and none as of December 31, 2020.

The decrease of $4.5 million in on-balance sheet substandard assets during first quarter was primarily driven by credit upgrades during the quarter in crops, permanent plantings, livestock, and part-time farms, partially offset by credit downgrades in storage and processing.

The on-balance sheet Agricultural Finance mortgage loan portfolio grew by $85.2 million, which, when coupled with credit upgrades, caused the percentage of substandard assets to decrease.

The $26.4 million decrease in substandard assets in our off-balance sheet LTSPC and Farmer Mac Guaranteed Securities portfolios during first quarter was primarily due to credit upgrades across the portfolios, particularly crops and livestock.

There were no substandard assets in the Rural Infrastructure Finance loan purchase portfolio as of March 31, 2022 and one loan classified as substandard in that portfolio as of December 31, 2021.

For an analysis of current loan-to-value ratios across substandard and other internally assigned risk ratings, see Table 27 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

The following table presents Farm & Ranch 90-day delinquencies, in dollars and as a percentage of the Farm & Ranch portfolio, for both on- and off-balance sheet assets as of September 30, 2021, June 30, 2021, and December 31, 2020:

Farm & Ranch Line of Business

The following table presents 90-day delinquencies for on-balance sheet Agricultural Finance mortgage loan purchases and off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities, in dollars and as a percentage of the respective balance sheet category as of March 31, 2022 and December 31, 2021:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

September 30, 2021 $ 52,625 0.78 % $ 2,167 0.08 %

June 30, 2021 56,790 0.86 % 6,286 0.26 %

March 31, 2022 $ 53,960 0.78 % $ 1,887 0.06 %

December 31, 2021 43,710 0.64 % 3,597 0.12 %

Increase/(decrease) from prior quarter-ending $ (4,165) (0.08) % $ (4,119) (0.18) %

Increase/(decrease) from prior year-ending $ 10,250 0.14 % $ (1,710) (0.06) %

On-balance sheet Farm & Ranch loans 90 or more days delinquent decreased in crops.

Off-balance sheet Farm & Ranch loans 90 days or more delinquent decreased in crops and livestock.

The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet portfolio represented over half of the aggregate 90-day delinquencies as of September 30, 2021.

As of both September 30, 2021 and December 31, 2020, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans.

As of June 30, 2021, there was one delinquent loan in the amount of $10.0 million in that portfolio.

On-balance sheet Agricultural Finance loans 90 or more days delinquent increased in all commodity groups, except crops.

Off-balance sheet Agricultural Finance LTSPCs and Farmer Mac Guaranteed Securities 90 days or more delinquent decreased in livestock and permanent plantings, while all other commodity groups remained constant.

The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet Agricultural Finance portfolio represented over half of the aggregate 90-day delinquencies as of March 31, 2022.

As of both March 31, 2022 and December 31, 2021, there were no 90-day delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loan purchases and loans underlying LTSPCs.

For more information about Farmer Mac's credit metrics, including 90-day delinquencies, the total allowance for losses, and substandard assets, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

COVID-19 Pandemic

Farmer Mac has operated successfully throughout the COVID-19 pandemic with most employees still working remotely.

Farmer Mac has maintained uninterrupted access to the debt capital markets during that time and remains a source of capital and liquidity to rural borrowers facing economic or market volatility stemming from the ongoing pandemic.

For more information on the effects of the COVID-19 pandemic on Farmer Mac's business, see "Business—Human Capital" in the 2021 Annual Report and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook" in the 2021 Annual Report and in this report.

Use of Non-GAAP Measures

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Farmer Mac uses interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities.

The accrual of the contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income.

For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Losses on financial derivatives" on the consolidated statements of operations.

The accrual of the contractual amounts

due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income.

For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains on financial derivatives" on the consolidated statements of operations.

However, the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread.

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For the Three Months Ended

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

(in thousands, except per share amounts)

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Less reconciling items:

Losses on undesignated financial derivatives due to fair value changes (see Table 14) (1,864) (4,149)

Losses on hedging activities due to fair value changes (2,093) (5,245)

Gains on undesignated financial derivatives due to fair value changes (see Table 14) 1,698 1,695

Gains/(losses) on hedging activities due to fair value changes 2,024 (271)

Unrealized gains/(losses) on trading securities 94 (14)

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Net effects of terminations or net settlements on financial derivatives 15,512 1,165

Issuance costs on the retirement of preferred stock — (1,667)

Income tax effect related to reconciling items (4,063) (544)

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Credit related expense (GAAP):

Provision for losses 255 1,200

Total credit related expense 255 1,200

Operating expenses (GAAP):

Compensation and employee benefits 10,027 8,791

General and administrative 6,330 5,044

Regulatory fees 750 725

Total operating expenses 17,107 14,560

Net earnings 43,572 41,154

Income tax expense (4)

Preferred stock dividends (GAAP) 6,774 5,166

Core earnings $ 27,646 $ 27,691

Core earnings per share:

Basic $ 2.57 $ 2.58

Diluted 2.55 2.57

Weighted-average shares:

Basic 10,766 10,734

Diluted 10,842 10,785

(1) Net effective spread is a non-GAAP measure.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread.

See Table 11 for a reconciliation of net interest income to net effective spread.

(2) Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3) Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4) Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings

For the Nine Months Ended

September 30, 2021 September 30, 2020

(in thousands, except per share amounts)

Net income attributable to common stockholders $ 77,691 $ 59,745

Less reconciling items:

Losses on undesignated financial derivatives due to fair value changes (see Table 14) (3,890) (1,933)

Losses on hedging activities due to fair value changes (4,461) (13,846)

Unrealized losses on trading securities (39) (173)

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 59 135

Net effects of terminations or net settlements on financial derivatives 923 (346)

Issuance costs on the retirement of preferred stock — (1,667)

Income tax effect related to reconciling items 1,556 3,394

Sub-total (5,852) (14,436)

Core earnings $ 83,543 $ 74,181

Composition of Core Earnings:

Net effective spread (1)

$ 166,335 $ 142,434

Guarantee and commitment fees (2)

12,896 14,498

Total revenues 180,670 159,107

Credit related expense (GAAP):

(Release of)/provision for losses (759) 5,082

Gains on sale of REO — (485)

Release of losses (54) (31)

Total credit related expense (54) (31)

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Income tax expense (4)

27,135 22,911

Preferred stock dividends (GAAP) 6,791 5,269

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Reconciliation of GAAP Basic Earnings Per Share to Core Earnings - Basic Earnings Per Share

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

For the Three Months Ended

March 31, 2022 March 31, 2021

(in thousands, except per share amounts)

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Less reconciling items:

Losses on undesignated financial derivatives due to fair value changes (see Table 14) (0.17) (0.39) (0.36) (0.18)

Losses on hedging activities due to fair value changes (0.19) (0.49) (0.42) (1.29)

Unrealized losses on trading securities — (0.02) — (0.02)

Gains on undesignated financial derivatives due to fair value changes (see Table 14) 0.16 0.16

Gains/(losses) on hedging activities due to fair value changes 0.19 (0.03)

Unrealized gains on trading securities 0.01 —

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value — —

Net effects of terminations or net settlements on financial derivatives 1.44 0.11

Issuance costs on the retirement of preferred stock — (0.15) — (0.16)

Income tax effect related to reconciling items (0.38) (0.05)

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Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

For the Three Months Ended

March 31, 2022 March 31, 2021

(in thousands, except per share amounts)

1 unchanged sentence

Less reconciling items:

Losses on undesignated financial derivatives due to fair value changes (see Table 14) (0.17) (0.39) (0.36) (0.18)

Losses on hedging activities due to fair value changes (0.19) (0.49) (0.42) (1.28)

Unrealized losses on trading securities — (0.02) — (0.02)

Gains on undesignated financial derivatives due to fair value changes (see Table 14) 0.16 0.16

Gains/(losses) on hedging activities due to fair value changes 0.19 (0.03)

Unrealized gains on trading securities 0.01 —

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value — —

Net effects of terminations or net settlements on financial derivatives 1.42 0.11

Issuance costs on the retirement of preferred stock — (0.15) — (0.15)

Income tax effect related to reconciling items (0.38) (0.05)

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Losses on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above:

(a) Losses on undesignated financial derivatives due to fair value changes;

and (b) Losses on hedging activities due to fair value changes.

(a) Gains on undesignated financial derivatives due to fair value changes;

and (b) Gains/(losses) on hedging activities due to fair value changes.

The table below calculates the non-GAAP reconciling item for losses on hedging activities due to fair value changes:

Non-GAAP Reconciling Items for (Losses)/Gains on Hedging Activities due to Fair Value Changes

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

For the Three Months Ended

March 31, 2022 March 31, 2021

(in thousands)

Losses due to fair value changes (see Table 4.2) $ (1,920) $ (5,047) $ (3,299) $ (13,109)

Gains due to fair value changes (see Table 4.2) $ 2,364 $ 345

Initial cash payment (received) at inception of swap (340) (616)

Losses on hedging activities due to fair value changes $ (2,093) $ (5,245) $ (4,461) $ (13,846)

Gains/(losses) on hedging activities due to fair value changes $ 2,024 $ (271)

Unrealized gains/(losses) on trading securities.

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Net Interest Income .

The following table provides information about interest-earning assets and funding for the nine months ended September 30, 2021 and 2020.

The following table provides information about interest-earning assets and funding for the quarters ended March 31, 2022 and 2021.

The average balance of non-accruing loans is included in the average balance of loans, Farmer Mac Guaranteed Securities, and USDA Securities presented, though the related income is accounted for on a cash basis.

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The interest income and expense associated with these trusts are shown in the net effect of consolidated trusts.

For the Nine Months Ended

September 30, 2021 September 30, 2020

For the Three Months Ended

March 31, 2022 March 31, 2021

Balance Income/

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Net interest income/yield $ 24,761,761 $ 61,875 1.00 % $ 23,347,368 $ 53,251 0.91 %

(1) Excludes interest income of $30.1 million and $41.8 million in the first nine months of 2021 and 2020, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(1) Excludes interest income of $8.1 million and $10.6 million in first quarter 2022 and 2021, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(2) Includes current portion of long-term notes.

(3) Excludes interest expense of $26.4 million and $36.8 million in the first nine months of 2021 and 2020, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(3) Excludes interest expense of $7.0 million and $9.4 million in first quarter 2022 and 2021, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(4) Includes the effect of consolidated trusts with beneficial interests owned by third parties.

The $29.1 million year-over-year increase in net interest income was primarily due to a $14.1 million increase related to new business volume, a $9.8 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), and a $5.7 million decrease in funding costs.

In percentage terms, the 0.12% increase in net interest income was primarily attributable to an increase of 0.06% in net fair value changes from designated financial derivatives and an increase of 0.05% in new business volume.

The $8.6 million year-over-year increase in net interest income was primarily due to a $5.0 million increase from net new business volume, a $2.0 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), a $0.8 million increase in net coupon yields related to the acquisition, in third quarter 2021, of the loan servicing rights on a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios, and a $0.7 million increase in cash-basis interest income.

The following table sets forth information about changes in the components of Farmer Mac's net interest income prior to consolidation of certain trusts for the periods indicated.

For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by old rate), and changes in rate (change in rate multiplied by old volume), and then allocated based on the relative size of rate and volume changes from the prior period.

For the Nine Months Ended September 30, 2021 Compared to Same Period in 2020

For the Three Months Ended March 31, 2022 Compared to Same Period in 2021

Increase/(Decrease) Due to

14 unchanged sentences

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for more information about net effective spread.

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Dollars Yield Dollars Yield Dollars Yield Dollars Yield

For the Three Months Ended

March 31, 2022 March 31, 2021

Dollars Yield Dollars Yield

(dollars in thousands)

6 unchanged sentences

Net effective spread $ 57,839 0.97 % $ 53,859 0.97 %

The $23.9 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $14.1 million from new business volume, a $8.9 million decrease in non-GAAP funding costs, and a $1.2 million increase in cash collections on non-accrual loans.

In percentage terms, the increase of 0.07% was primarily attributable to the increase of 0.05% related to net new business volume, the decrease in non-GAAP funding costs of 0.03%, and the increase of 0.01% related to cash collections on non-accrual loans.

The $4.0 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $4.4 million increase from net new business volume, a $0.8 million increase in net coupon yields related to our acquisition, in third quarter 2021, of the loan servicing rights of a sizeable portion of our

Farm & Ranch loan and USDA Guaranteed Securities portfolios, and a $0.7 million increase in cash-basis interest income.

These factors were partially offset by a $1.7 million increase in non-GAAP funding costs.

In percentage terms, net effective spread remained constant on a year-over-year basis.

See Note 10 to the consolidated financial statements for more information about net interest income and net effective spread from Farmer Mac's individual business segments.

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Provision for and Release of Allowance for Losses and Reserve for Losses .

The following table summarizes the components of Farmer Mac's total allowance for losses for the three and nine months ended September 30, 2021 and 2020:

As of September 30, 2021 As of September 30, 2020

The following table summarizes the components of Farmer Mac's total allowance for losses for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

March 31, 2022 March 31, 2021

Losses Reserve

4 unchanged sentences

(in thousands)

For the Three Months Ended:

Beginning balance $ 14,492 $ 1,950 $ 16,442 $ 14,298 $ 3,277 $ 17,575

Provision for/(release of) losses 56 (110) (54) 913 (944) (31)

Ending balance $ 14,816 $ 2,000 $ 16,816 $ 16,404 $ 3,568 $ 19,972

For the Nine Months Ended:

Beginning balance $ 14,298 $ 3,277 $ 17,575 $ 10,454 $ 2,164 $ 12,618

Cumulative effect adjustment from adoption of current expected credit loss standard — — — 1,793 863 2,656

Adjusted beginning balance 14,298 3,277 17,575 12,247 3,027 15,274

Provision for/(release of) losses 518 (1,277) (759) 4,551 541 5,092

Charge-offs (84) — (84) — — —

Ending balance $ 14,464 $ 1,840 $ 16,304 $ 15,211 $ 2,333 $ 17,544

Guarantee and Commitment Fees .

The following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ %

(dollars in thousands)

See Notes 5 and 6 to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees." During first quarter 2022, we recorded a $2.4 million release from the allowance for losses related to a Rural Utilities loan as a result of the upgrade of that loan under our internal ratings system after the borrower successfully securitized a large payable incurred during the arctic freeze that struck Texas in February 2021.

This securitization transaction received an investment grade credit rating and exhibited the inherent strength of rural electric cooperatives and the legislative support that these providers of essential energy services typically receive.

The release from the allowance for losses attributable to this one loan was offset by provisions to the allowance for losses attributable to new loan volume added during first quarter 2022 and other risk rating downgrades, resulting in an overall provision to the allowance for losses of $56,000 during first quarter 2022.

Guarantee and Commitment Fees .

The decrease in guarantee and commitment fees for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to a decrease in the average outstanding balance of LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities during 2021.

As adjusted for the core earnings presentation, guarantee and commitment fees were $4.3 million and $12.9 million for the three and nine months ended September 30, 2021, respectively, compared to $4.7 million and $14.5 million for the three and nine months ended September 30, 2020, respectively.

In Farmer Mac's presentation of core earnings, guarantee and commitment fees include interest income and interest expense related to consolidated trusts owned by third parties to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(in thousands)

Contractual guarantee fees $ 3,502 $ 3,030 $ 472 16 %

Guarantee obligation amortization 2,195 2,709 (514) (19) %

Guarantee asset fair value changes (2,002) (2,709) 707 (26) %

Guarantee fee income $ 3,695 $ 3,030 $ 665 22 %

Guarantee and commitment fees increased for the quarter ended March 31, 2022 compared to 2021, which was due to increases in the average outstanding balance of LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities during first quarter 2022.

As adjusted for the core earnings presentation, guarantee and commitment fees were $4.6 million for the three months ended March 31, 2022 compared to $4.2 million for first quarter 2021.

Additionally, Farmer Mac has excluded guarantee asset fair value changes, because these fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations if Farmer Mac fulfills its guarantee obligation throughout the term of the guaranteed securities, as is expected.

For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see Table 6 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

Losses on financial derivatives .

The components of gains and losses on financial derivatives for the three and nine months ended September 30, 2021 and 2020 are summarized in the following table:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ %

(dollars in thousands)

Losses due to fair value changes $ (1,864) $ (4,149) $ 2,285 (55) % $ (3,890) $ (1,933) $ (1,957) (101) %

Gains on financial derivatives.

The components of gains and losses on financial derivatives for the three months ended March 31, 2022 and 2021 are summarized in the following table:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(in thousands)

Gains due to fair value changes $ 1,698 $ 1,695 $ 3 — %

Accrual of contractual payments (994) 2,068 (3,062) (148) %

Losses due to terminations or net settlements (600) (28) (572) (2043) % (384) (1,416) 1,032 73 %

Losses on financial derivatives $ (2,347) $ (564) $ (1,783) (316) % $ (1,120) $ (3,339) $ 2,219 66 %

Gains due to terminations or net settlements 15,370 530 14,840 2800 %

Gains on financial derivatives $ 16,074 $ 4,293 $ 11,781 274 %

These changes in fair value are primarily the result of fluctuations in long-term interest rates.

The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are undesignated financial derivatives is shown as expense related to financial derivatives.

Payments or receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S.

Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "Losses due to terminations or net

settlements" in the table above.

receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S.

Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "Gains due to terminations or net settlements" in the table above.

For undesignated swaps, when there is no direct payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac may receive an initial cash payment from the swap dealer at the inception of the swap to offset dollar-for-dollar the amount of the discount on the associated hedged debt.

Changes in the fair value of these swaps are recognized immediately in "Losses on financial derivatives," while the offsetting discount on the hedged debt is amortized over the term of the debt as an adjustment to its yield.

Changes in the fair value of these swaps are recognized immediately in "Gains on financial derivatives," while the offsetting discount on the hedged debt is amortized over the term of the debt as an adjustment to its yield.

The amounts of initial cash payments received by Farmer Mac vary depending on the number of the aforementioned type of swaps it executes during a quarter.

Other Income .

The following table presents other income for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ %

(dollars in thousands)

The following table presents other income for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(in thousands)

Late fees $ 354 $ 287 $ 67 23 %

Servicing fees 280 — 280 N/A

Mortgage servicing rights amortization (131) — (131) N/A

Other 172 296 (124) (42) %

Total other income $ 675 $ 583 $ 92 16 %

The decrease in other income for the nine months ended September 30, 2021 compared to the same period in 2020 is primarily due to a decrease in rate modification fees on Farm & Ranch loans.

The increase in other income for the three months ended March 31, 2022 compared to 2021 is primarily due to an increase in servicing fees, partially offset by a decrease in loan rate modification fees.

Operating Expenses .

The components of operating expenses for the three and nine months ended September 30, 2021 and 2020 are summarized in the following table:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ %

(dollars in thousands)

The components of operating expenses for the three months ended March 31, 2022 and 2021 are summarized in the following table:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(in thousands)

Compensation and employee benefits $ 13,298 $ 11,795 $ 1,503 13 %

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Compensation and Employee Benefits .

The increase in compensation and employee benefits expenses for 2021 compared to 2020 was due to increased headcount.

We hired ten new employees in connection with the strategic acquisition of loan servicing rights in August 2021.

The increase in compensation and employee benefits expenses for first quarter 2022 compared to 2021 was due to increased headcount and increased stock compensation.

General and Administrative Expenses (G&A) .

The increase in G&A expenses for 2021 compared to 2020 was primarily due to increased spending on software licenses and information technology consultants to support growth and strategic initiatives.

We entered into a transition services agreement in connection with the strategic acquisition of loan servicing rights in August 2021.

The increase in G&A expenses for first quarter 2022 compared to 2021 was primarily due to increased spending on software licenses and information technology and other consultants to support growth and strategic initiatives.

We entered into a transition services agreement in connection with the strategic acquisition of loan servicing rights in third quarter 2021.

Under that agreement, we have agreed to pay $1.25 million to the seller of the servicing rights in installments through December 31, 2022 for continuing transition assistance.

Income Tax Expense .

The following table presents income tax expense and the effective income tax rate for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ %

The following table presents income tax expense and the effective income tax rate for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(dollars in thousands)

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Business Volume .

The following table sets forth the net growth or decrease in Farmer Mac's four lines of business for the three and nine months ended September 30, 2021 and 2020:

Net New Business Volume – Farmer Mac Loan Purchases, Guarantees, LTSPCs, and AgVantage Securities

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Net Growth/(Decrease) Net Growth/(Decrease) Net Growth/(Decrease) Net Growth/(Decrease)

The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the three months ended March 31, 2022 and 2021:

Net New Business Volume

For the Three Months Ended

March 31, 2022 March 31, 2021

Balance Sheet Net Growth/(Decrease) Net Growth/(Decrease)

(in thousands)

Agricultural Finance:

Farm & Ranch:

Loans $ 277,164 $ 399,495 $ 910,983 $ 905,277

Loans held in trusts:

Beneficial interests owned by third party investors (100,621) (159,683) (309,672) (324,509)

LTSPCs 212,664 (8,313) 262,868 (108,368)

USDA Guarantees:

USDA Securities 6,552 76,949 (24,611) 193,487

Farmer Mac Guaranteed USDA Securities (10,759) (19,626) (39,405) (78,533)

Loans On-balance sheet $ 160,496 $ 255,228

Loans held in consolidated trusts:

Beneficial interests owned by third-party investors On-balance sheet (60,423) (112,520)

On-balance sheet (378) —

USDA Securities On-balance sheet (4,999) 14,777

AgVantage Securities On-balance sheet 430,000 (200,000)

LTSPCs and unfunded commitments Off-balance sheet (8,824) (70,788)

Farmer Mac Guaranteed Securities Off-balance sheet (33,874) (21,539)

Loans serviced for others Off-balance sheet (1,042) —

Total Farm & Ranch $ 480,956 $ (134,842)

Corporate AgFinance:

Loans On-balance sheet $ (14,837) $ (16,179)

AgVantage Securities On-balance sheet 7,798 322

Unfunded Loan Commitments Off-balance sheet 9,965 (462)

Total Corporate AgFinance $ 2,926 $ (16,319)

Total Agricultural Finance $ 483,882 $ (151,161)

Rural Infrastructure Finance:

Rural Utilities:

Loans (3,396) 7,786 (17,240) 438,062

LTSPCs 40,796 (14,100) 17,830 (33,326)

Institutional Credit:

AgVantage securities 499,230 (335,328) 393,944 (120,744)

Total purchases, guarantees, LTSPCs, and AgVantage securities $ 921,630 $ (52,820) $ 1,194,697 $ 871,346

The net increase was primarily attributable to a net increases of $499.2 million in the Institutional Credit line of business, $389.2 million in the Farm & Ranch line of business, and $37.4 million in the Rural Utilities line of business, partially offset by a net decrease of $4.2 million in the USDA Guarantees line of business.

The $389.2 million net increase in our Farm & Ranch line of business reflected a $277.2 million net increase in outstanding loan purchase volume and a $212.7 million net increase in loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities, which was partially offset by a net decrease of $100.6 million in loans held in consolidated trusts.

Our net growth of 15.7% in the Farm & Ranch on-balance sheet portfolio over the twelve months ended September 30, 2021 is significantly higher than the 6.6% net growth of the overall agricultural mortgage loan market over the twelve months ended June 30, 2021 (based on our analysis of call report data from commercial banks, -1.6% growth, and Farm Credit System, 12.7% growth).

The $499.2 million net increase in the Institutional Credit line of business reflects $1.4 billion in gross volume, partially offset by $0.9 billion of paydowns and maturities.

Within the $1.4 billion of gross volume is $1.2 billion of short-term funding that will mature in fourth quarter 2021.

The $37.4 million net increase in the Rural Utilities line of business was due to $113.9 million in gross new volume, partially offset by $76.5 million in paydowns in loans and LTSPCs.

Within the $113.9 million in gross volume is $50.0 million of unfunded telecommunications loan commitments.

The $4.2 million net decrease in the USDA Guarantees line of business reflected $118.3 million in paydowns, partially offset by $114.1 million in gross new volume.

The net volume decrease is reflective of the low interest rate environment that has increased the competition and lowered the spreads in this line of business.

The level and composition of Farmer Mac’s outstanding business volume is based on the relationship between new business, maturities, and repayments on existing assets from quarter to quarter.

Loans On-balance sheet $ 157,232 $ (23,173)

AgVantage Securities On-balance sheet (23,381) 101,997

LTSPCs and Unfunded Loan Commitments Off-balance sheet (22,632) (10,040)

Farmer Mac Guaranteed Securities Off-balance sheet — —

Total Rural Utilities $ 111,219 $ 68,784

Renewable Energy:

Loans On-balance sheet $ 5,483 $ 9,864

Unfunded Loan Commitments Off-balance sheet 28,363 10,949

Total Renewable Energy $ 33,846 $ 20,813

Total Rural Infrastructure Finance $ 145,065 $ 89,597

Total $ 628,947 $ (61,564)

(1) An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

Farmer Mac's outstanding business volume was $24.2 billion as of March 31, 2022, a net increase of $0.6 billion from December 31, 2021 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The $0.5 billion net increase in Farm & Ranch during first quarter 2022 resulted from $2.5 billion of new purchases, commitments, and guarantees, partially offset by $2.0 billion of scheduled maturities and repayments.

Farmer Mac purchased a total of $416.2 million in loans, which was primarily driven by farm real estate acquisitions due to improved borrower economics as well as a competitive, albeit an increasing interest rate environment resulting in demand for intermediate and long-term financing solutions.

The $416.2 million in gross Farm & Ranch loan purchases was partially offset by $255.7 million in scheduled maturities and repayments.

Farmer Mac also purchased a total of $1.8 billion in Farm & Ranch AgVantage Securities during first quarter 2022, which primarily reflected the refinancing of maturing securities as well as financial counterparties seeking to add longer term AgVantage securities to manage their asset-liability maturity profile given recent increases in credit spreads and interest rates.

The $1.8 billion in gross purchases was partially offset by $1.3 billion in scheduled maturities.

Approximately $1.1 billion of the total $1.8 billion in gross purchases reflected purchases that refinanced maturing AgVantage securities and were issued at short-term tenors, which may create volatility in AgVantage volumes throughout the year.

However, Farmer Mac does not anticipate a material impact to its net effective spread given the low spread related to these securities due to the short maturities and the credit strength of the counterparties.

The $2.9 million net increase in Corporate AgFinance during first quarter 2022 resulted from $103.4 million of new loan and AgVantage security purchases, which was offset by $100.4 million of scheduled maturities and repayments.

Farmer Mac purchased a total of $61.7 million in loans, which was offset by $76.5 million in scheduled maturities and repayments.

This net decrease in loans was primarily due to scheduled amortization and prepayments due to strong land values and agricultural incomes.

The $111.2 million net increase in Rural Utilities during first quarter 2022 resulted from $378.0 million of new purchases, commitments, and guarantees, which was partially offset by $266.7 million of scheduled maturities and repayments.

Farmer Mac purchased a total of $208.0 million in Rural Utilities loans, which was fueled by a competitive but increasing interest rate environment resulting in demand for long-term financing solutions for planned maintenance and capital expenditures.

The $208.0 million in loan purchases was partially offset by $50.7 million in scheduled maturities and repayments.

The $33.8 million net increase in Renewable Energy during first quarter 2022 primarily reflects a $35.0 million commitment to a large solar project being constructed in the southeast United States, consisting of $6.6 million of funded loan purchases (which was partially offset by $1.2 million of other loan repayments) and $28.4 million in unfunded loan commitments expected to be drawn throughout 2022.

Farmer Mac's outstanding business volume was $21.9 billion as of March 31, 2021, a net decrease of $61.6 million from December 31, 2020 after taking into account all new business, scheduled maturities, and paydowns on existing assets.

The $134.8 million net decrease in Farm & Ranch during first quarter 2021 resulted from $1.2 billion of scheduled maturities and repayments, partially offset by $1.1 billion of new purchases and guarantees,

The $16.3 million net decrease in Corporate AgFinance during first quarter 2021 resulted from $202.7 million of scheduled maturities and repayments, partially offset by $186.4 million of new purchases.

The $68.8 million net increase in Rural Utilities during first quarter 2021 resulted from $171.5 million of new purchases and guarantees, which was partially offset by $102.8 million of scheduled maturities and repayments.

The $20.8 million net increase in Renewable Energy during first quarter 2021 resulted from $23.5 million of new purchases, which was partially offset by $2.7 million of repayments.

The level and composition of Farmer Mac’s outstanding business volume is based on the relationship between new business, loan sales, scheduled maturities, and repayments on existing assets from year to year.

This relationship in turn depends on a variety of factors both internal and external to Farmer Mac.

3 unchanged sentences

The following table sets forth information about the Farmer Mac Guaranteed Securities issued during the periods indicated:

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

For the Three Months Ended

March 31, 2022 March 31, 2021

(in thousands)

Loans securitized and sold as Farm & Ranch Guaranteed Securities $ 34,998 $ 36,562 $ 84,131 $ 64,612

AgVantage securities $ 1,941,360 $ 442,912

Loans securitized and held in consolidated trusts with beneficial interests owned by third parties 25,928 49,133

Total Farmer Mac Guaranteed Securities Issuances $ 1,967,288 $ 1,967,288 $ 492,045

Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those loans.

The weighted-average age of the Farm & Ranch non-delinquent eligible loans purchased and retained (excluding the purchases of defaulted loans) during both third quarter 2021 and 2020 was less than one year.

Of those loans, 70% and 68% had principal amortization periods longer than the maturity date, resulting in balloon payments at maturity, with a weighted-average remaining term to maturity of 22.9 years and 23.2 years for each period, respectively.

During the three and nine months ended September 30, 2021 and 2020, Farmer Mac realized no gains or losses from the sale of Farmer Mac Guaranteed Securities or USDA Securities.

During the three months ended March 31, 2022 and 2021, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts.

Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets.

For the first nine months of 2021 and 2020, no Farmer Mac Guaranteed Securities were sold to a related party.

The following table sets forth information about outstanding volume in each of Farmer Mac's four lines of business as of the dates indicated:

Lines of Business - Outstanding Business Volume

As of September 30, 2021 As of December 31, 2020

During the three months ended March 31, 2022 and 2021, Farmer Mac realized no gains or losses from the issuance of Farmer Mac Guaranteed USDA Securities or AgVantage Securities.

The following table sets forth information about outstanding volume in each of Farmer Mac's lines of business as of the dates indicated:

Outstanding Business Volume

Balance Sheet As of March 31, 2022 As of December 31, 2021

(in thousands)

Agricultural Finance:

Farm & Ranch:

Loans $ 5,800,376 $ 4,889,393

Loans held in trusts:

Beneficial interests owned by third party investors 977,373 1,287,045

LTSPCs 2,607,261 2,325,431

Guaranteed Securities 60,349 79,312

USDA Guarantees:

USDA Securities 2,434,582 2,452,964

Farmer Mac Guaranteed USDA Securities 288,120 333,754

Loans On-balance sheet $ 4,935,566 $ 4,775,070

Loans held in consolidated trusts:

Beneficial interests owned by third-party investors On-balance sheet 888,200 948,623

On-balance sheet 11,919 12,297

USDA Securities On-balance sheet 2,440,807 2,445,806

AgVantage Securities On-balance sheet 5,155,000 4,725,000

LTSPCs and unfunded commitments Off-balance sheet 2,578,330 2,587,154

Farmer Mac Guaranteed Securities Off-balance sheet 544,484 578,358

Loans serviced for others Off-balance sheet 21,289 22,331

Total Farm & Ranch $ 16,575,595 $ 16,094,639

Corporate AgFinance:

Loans On-balance sheet $ 1,108,463 $ 1,123,300

AgVantage Securities On-balance sheet 375,262 367,464

Unfunded Loan Commitments Off-balance sheet 57,035 47,070

Total Corporate AgFinance $ 1,540,760 $ 1,537,834

Total Agricultural Finance $ 18,116,355 $ 17,632,473

Rural Infrastructure Finance:

Rural Utilities:

Loans 2,243,172 2,260,412

LTSPCs 574,255 556,425

Institutional Credit

AgVantage Securities 8,133,303 7,739,359

Loans On-balance sheet $ 2,459,605 $ 2,302,373

AgVantage Securities On-balance sheet 3,009,881 3,033,262

LTSPCs and Unfunded Loan Commitments Off-balance sheet 534,205 556,837

Farmer Mac Guaranteed Securities Off-balance sheet 2,755 2,755

Total Rural Utilities $ 6,006,446 $ 5,895,227

Renewable Energy:

Loans On-balance sheet $ 92,246 $ 86,763

Unfunded Loan Commitments Off-balance sheet 28,363 —

Total Renewable Energy $ 120,609 $ 86,763

Total Rural Infrastructure Finance $ 6,127,055 $ 5,981,990

Total $ 24,243,410 $ 23,614,463

The following table summarizes by maturity date the scheduled principal amortization of loans held, loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and LTSPCs, USDA Securities, and Farmer Mac Guaranteed USDA Securities as of September 30, 2021:

Schedule of Principal Amortization as of September 30, 2021

Loans Held Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs USDA Securities and Farmer Mac Guaranteed USDA Securities Total

(1) An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

Schedule of Principal Amortization as of March 31, 2022

Loans Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs USDA Securities and Farmer Mac Guaranteed USDA Securities Total

(in thousands)

6 unchanged sentences

Total $ 9,484,080 $ 3,510,317 $ 2,672,907 $ 15,667,304

Of the $23.1 billion outstanding principal balance of volume included in Farmer Mac's four lines of business as of September 30, 2021, $8.1 billion were AgVantage securities included in the Institutional Credit line of business.

Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage

securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due.

The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of September 30, 2021:

Of Farmer Mac's $24.2 billion outstanding principal balance of business volume as of March 31, 2022, $8.5 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure Finance lines of business.

Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due.

The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of March 31, 2022:

AgVantage Balances by Year of Maturity

September 30, 2021

March 31, 2022

(in thousands)

1 unchanged sentence

2023 1,129,586

2023 1,006,807

Thereafter (1)

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(1) Includes various maturities ranging from 2026 to 2044.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.4 years as of September 30, 2021.

Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as the secondary market that helps meet the financing needs of rural America.

The pace of Farmer Mac’s growth will depend on the capital and liquidity needs of the lending institutions in the agricultural and rural utilities business as well as the overall health of borrowers in the sectors we serve.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.9 years as of March 31, 2022.

Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as a secondary market that helps meet the financing needs of rural America.

The pace and trajectory of Farmer Mac's growth will depend on the capital and liquidity needs of the lending institutions in the agriculture and rural utilities business and the overall financial health of borrowers in the sectors we serve.

Farmer Mac foresees opportunities for profitable growth across our lines of business driven by several key factors:

• As agricultural and rural utilities lenders seek to manage equity capital and return on equity capital requirements or seek to reduce exposure due to lending or concentration limits, Farmer Mac can provide relief for those institutions through loan and portfolio purchases, participations, guarantees, LTSPCs, or wholesale funding.

• Future growth opportunities in Farmer Mac’s Rural Utilities line of business may evolve by deepening business relationships with eligible counterparties, financing broadband-related capital expenditures and rural telecommunications facilities, growing opportunities for renewable energy project finance, and exploring new types of loan products.

• As agricultural and rural infrastructure lenders seek to manage equity capital and return on equity capital requirements or reduce exposure due to lending or concentration limits, Farmer Mac can provide relief for those institutions through loan and portfolio purchases, participations, guarantees, LTSPCs, or wholesale funding.

• As a result of business and product development efforts and continued interest in the agricultural asset class from institutional investors and nontraditional agricultural real estate lenders, Farmer Mac's customer base and product set continue to expand and diversify, which may generate more demand for Farmer Mac's products from new sources.

• Farmer Mac's growing relationships with larger regional and national lenders, as well as consolidation within the agricultural lending industry, continue to provide opportunities that could influence Farmer Mac's loan demand and increase the average transaction size within Farmer Mac's lines of business.

• Future growth opportunities in Farmer Mac's Rural Infrastructure Finance line of business may evolve by deepening business relationships with eligible counterparties, financing broadband-related capital expenditures and rural telecommunications facilities, growing opportunities for renewable energy project finance, and exploring new types of loan products.

These opportunities may be limited by sector growth, credit quality, and the competitiveness of Farmer Mac's products.

• As a result of business and product development efforts and continued interest of institutional investors in agricultural assets, Farmer Mac’s customer base and product set continue to expand, which may generate more demand for Farmer Mac’s products from new sources.

• Farmer Mac’s growing relationships with larger regional and national lenders continue to provide opportunities that could influence Farmer Mac’s loan demand and increase the average transaction size within Farmer Mac’s lines of business.

• Expansion and refinancing opportunities for agricultural producers and agribusinesses resulting from competitive interest rates have increased financing needs to support mergers and acquisitions, and vertical integration across many sectors of the agricultural industry, which may also generate demand for Farmer Mac’s loan products.

• As we grow our outstanding business volume through the purchases and commitments described above, we are also developing new ways to obtain funding and manage our overall credit risk.

In October 2021, we completed a structured and syndicated agricultural mortgage-backed securitization (AMBS) that included a $280.0 million senior tranche guaranteed by Farmer Mac and a $22.7 million unguaranteed subordinate tranche sold to investors, resulting in off-balance sheet treatment for Farm & Ranch loans formerly held on Farmer Mac's balance sheet.

During fourth quarter 2021, Farmer Mac expects to record a gain on this transaction of approximately $4 million after-tax.

Farmer Mac will serve as the master servicer of the securitization and as central servicer for a portion of the underlying loan pool.

This new source of funding provides us with another tool to help manage capital and credit risk and also provides an investment opportunity for leading institutional investors.

The disruptions from the COVID-19 pandemic experienced during 2020 continued to be significantly moderated during the first three quarters of 2021.

However, the potential increase of COVID-19 resulting from certain variants of coronavirus and the utilization of vaccines both domestically and globally continue to evolve and create uncertainty, which may result in increased market volatility such as the supply chain disruptions currently impacting global trade.

Farmer Mac’s mission is to support rural America, and the disruptions caused by COVID-19 may continue to present new and expanded opportunities for Farmer Mac to help meet the financing needs of rural America while also presenting uncertainties and risks.

See "Risk Factors" in Part I, Item 1A of the 2020 Annual Report for more information about the uncertainties and risks associated with the COVID-19 pandemic on Farmer Mac and its business.

• Expansion and acquisition opportunities for agricultural producers resulting from high agricultural incomes and rising costs have increased financing requirements for mergers and acquisitions, consolidation, and vertical integration across many sectors of the agricultural industry, which may also generate demand for Farmer Mac's loan products.

• While market rates have increased dramatically since the lows experienced in 2021, rates are near Farmer Mac's 15-year historical averages.

However, future changes to monetary policy and the overall level and pace of increases in interest rates could impact the pace and timing of Agricultural Finance mortgage loan purchase demand.

Russia's invasion of Ukraine has increased volatility for commodity prices and agricultural production costs for farmers and ranchers, who were already challenged by a strong inflationary environment.

While high commodity prices have thus far outpaced the significant increase in input costs, the impact on global commodity markets from the Ukraine conflict creates further uncertainty for farmers and ranchers in terms of global production, prices, and costs.

According to data from the USDA, Ukraine accounts for 10% of global wheat trade and 15% of global corn trade, so any disruption to production in 2022 could increase demand for U.S.

production and keep commodity prices elevated.

However, sanctions and trade restrictions have elevated oil and fertilizer prices, which influence U.S.

farmers' planting decisions,

particularly for acreage planted to corn, soybeans, and wheat.

Volatility is likely to persist until there is more certainty around the timing, pace, and conclusion of the conflict in Ukraine.

In addition to continued uncertainty from supply-side disruptions, market interest rates increased rapidly in first quarter 2022, driven by the Federal Reserve’s accelerated efforts to achieve monetary policy normalization and decelerate inflation.

A higher interest rate environment could slow the pace of farm mortgage refinancing.

While lower refinances could result in lower levels of new loan purchases in Farm & Ranch and USDA Guarantees products, it could also result in lower portfolio prepayment speeds, as was Farmer Mac’s experience between 2014 and 2018.

Farmer Mac offers a range of interest rates, tenors, and resetting options for loan products, allowing flexibility for originators and borrowers in all interest rate environments.

Operating Expense .

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We expect these efforts to continue and increase over the next 12 - 18 months as we innovate and grow our business while monitoring the growth in operating expenses commensurate with the growth in our revenue.

During the third quarter, we closed on a strategic acquisition that enhanced our operations by expanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios.

This acquisition will increase our interest income on our Farm & Ranch loans and USDA Guaranteed Securities that we service because there will not be any third-party central servicer retaining a central servicer fee on those assets.

During 2021, we closed on a strategic acquisition that enhanced our operations by expanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of our Farm & Ranch loan and USDA Securities portfolios.

This acquisition should increase our interest income on our Farm & Ranch loans and USDA Securities that we service because there will not be any third-party central servicer retaining a central servicer fee on those assets.

That increased interest income is expected to be partially offset by the increase in our operating expenses relating to our enhanced internal loan servicing operations.

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Agricultural Industry .

Economic conditions throughout the agricultural, food, fuel, and fiber sectors remained largely positive throughout the first three quarters of 2021.

Although grain commodity prices abated during the third quarter, corn, soybean, and wheat prices held between 20% and 40% above their 10-year averages.

Consumer mobility and demand held up during the third quarter, helping to restore fuel

demand and bring ethanol production back to 2019 levels by July 2021, according to U.S.

Energy Information Administration data.

Cattle and dairy prices remain the only major agricultural commodities with continued pressure on prices, but both sectors held at-or-above pre-pandemic price levels during third quarter 2021.

agricultural sector has become increasingly dependent on foreign markets as a source of demand.

Agriculture exports were strong in 2020, aided by a weaker U.S.

dollar, a recovery in Chinese demand for grains and oilseeds, and better overall trade relations.

These conditions continued to be favorable in the first three quarters of 2021, but sales to China slowed in the third quarter due to higher prices, rising grain supplies, and supply chain disruptions that challenged shipping lanes.

Exports have been boosted in 2021 by increases in sales of beef, dairy, pork, and tree nuts, according to data from the USDA's Foreign Agricultural Service (FAS), but global supply chain disruptions and high shipping costs are currently providing a major headwind for agricultural exports.

Through August 2021, USDA FAS trade data shows modest slowing of U.S.

agricultural export volumes to Asia, which could continue into 2022.

Farm incomes have been boosted in recent years by additional sources of liquidity and cash flow.

During 2020, Congress provided a significant amount of emergency assistance through direct payments to producers, food support funding, and other measures to support the food supply chain.

The USDA estimates that $9.3 billion of that funding has been disbursed to farmers and ranchers in 2021 through the Coronavirus Food Assistance Program (CFAP), with another $8.7 billion in forgivable loans distributed during the year through the Paycheck Protection Program (PPP) by the Small Business Administration.

The rebound in commodity prices combined with extensive government support payments led to a large increase in sector-wide profitability at the end of 2020 and into 2021.

USDA estimates for net farm income and net cash farm income in 2021 are the highest levels since 2013 at $113.0 billion and $134.7 billion, respectively.

An average year generates approximately $100 billion in net farm income, so both 2021 metrics are well above historical averages.

Higher commodity prices are estimated to offset lower projected government payments in 2021.

Animal protein and specialty crop producers did not fully participate in the increased profitability, as higher labor, feed, and other input costs partially offset any gains in cash receipts.

Although farm incomes and profitability remain strong in 2021, a potential challenge for producers heading into 2022 will be rising input prices, including the cost of fertilizer, transportation and shipping, and the cost and availability of labor.

Farmland values increased steadily on average in 2021 after rising at approximately the rate of inflation for the last two years.

Though the COVID-19 pandemic slowed public auctions and sales during 2020, transactions picked up and values began to trend higher in fourth quarter 2020.

An improved profitability outlook combined with low market interest rates provided support for land values throughout 2021.

The agricultural economy experienced generally favorable conditions in first quarter 2022, with higher commodity prices partially offset by higher input prices.

In response to Russia's invasion of Ukraine, grain commodity prices rose rapidly in February and March 2022.

Higher commodity prices for grains and many animal proteins are likely to substantially increase gross cash receipts for the 2022 and 2023 marketing years.

Farm expenses also rose in first quarter 2022, driven by rising feed, energy, interest, and labor costs.

However, growth in income outpaced growth in expense, and net cash farm income increased nearly 15% in 2021 to $134.2 billion, the highest level since 2013.

Consumers have continued their return to restaurants and food service establishments in 2022, with a 19% annual increase in retail spending at food service and drinking places, according to advance retail sales data from the U.S.

Census Bureau.

Combined with an annual 8.4% increase in retail spending at food and drinking stores (e.g., grocery), consumers have demonstrated the ability to absorb increasing commodity prices in their food budgets in 2022.

The increase in farm profitability combined with low interest rates in 2020 and 2021 drove a rapid rise in land values and a decrease in farm delinquencies and bankruptcies.

Land value survey data from the USDA show a 7.0% increase in average farm real estate values from June 2020 to June 2021.

Annual farm real estate value gains were highest in the Northern Plains (9.4%) and the Southern Plains (9.0%) but also strong in Pacific states (8.6%) and the Corn Belt (7.7%).

The Federal Reserve Bank of Chicago AgLetter reported a 14% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between June 2020 and June 2021.

The Federal Reserve Bank of Chicago AgLetter reported a 22% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and

Wisconsin) between January 2021 and January 2022.

Data from the Federal Reserve Bank of Kansas City show a similar rise in land values in the Tenth District (primarily Kansas, Missouri, Nebraska, and Oklahoma).

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farmland values, economic forces affecting land markets are highly localized, and some markets may experience greater volatility than state or national averages indicate.

experienced $22 billion in severe weather disasters in 2020, the highest level in the 40 years tracked by the National Oceanic and Atmospheric Administration.

Economic conditions are likely to bring mixed effects to credit demand throughout 2022.

Strong asset appreciation and rising interest rates could signal a credit cycle expansion as financial decision-makers look to lock in long-term economics for their appreciating farm and agribusiness assets.

Farm profitability generally increases asset values and demand for the asset class, which also contributes to increasing credit demand.

The low interest rate environment in 2021 increased farmland mortgage refinancing and loan prepayment speeds throughout the year.

A reduction in loan refinancing is likely in 2022, as fewer borrowers will economically benefit from refinancing or restructuring their farm debt.

This could have mixed effects on mortgage portfolios, potentially lowering new sales and originations but also slowing portfolio prepayments and exits.

Finally, a rising yield curve coupled with widening market credit spreads could increase opportunities for corporate and institutional lending, as Farmer Mac's programs become more attractive at higher costs of capital.

Combined, these factors are expected to be generally supportive of continued net portfolio growth for Farmer Mac in 2022.

Positive economic conditions improved Farmer Mac's portfolio performance in early 2022, and they could continue to positively influence loan delinquencies and losses throughout the year.

Farmer Mac's 90-day delinquencies and substandard assets levels improved in first quarter 2022 relative to first quarter 2021.

One-quarter of the loan volume past due 90-days or more in fourth quarter 2021 cured or paid off by March 31, 2022.

The overall delinquency rate fell from 0.84% of the Farm & Ranch operating segment as of March 31, 2021 to 0.57% of the Farm & Ranch portfolio by March 31, 2022, a significant improvement.

The percentage of the portfolio rated substandard also continued to improve in first quarter 2022 to the lowest levels since 2016.

However, supply chain disruptions, rising input costs, and the potential for continued economic and weather-related stress increase the level of uncertainty inherent in the agricultural credit sector could alter the trajectory of the current agricultural cycle.

Farmer Mac believes that its portfolio continues to be highly diversified, both geographically and by commodity and that its portfolio has been underwritten to high credit quality standards.

Therefore, Farmer Mac believes that its portfolio is well-positioned to endure reasonably foreseeable volatility from cyclical and external factors.

For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Agricultural Finance mortgage loans in Farmer Mac's portfolio as of March 31, 2022, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

Exogenous factors facing farm and food producers can create uncertainty and market instability within the sector.

External market conditions that could adversely impact the farm and food sectors in 2022 include supply chain disruptions, foreign trade and trade policy, and environmental conditions.

The logistics of growing, harvesting, processing, packaging, shipping, storing, and retailing food are complex and intertwined.

Labor shortages and transportation disruptions created supply chain stoppages in 2020 and 2021, and they could continue to challenge producers throughout 2022.

agricultural sector has become increasingly dependent on foreign markets as a source of demand, making trade policy increasingly important to farms and food.

The USDA reports U.S.

agricultural exports in the fiscal year 2021 at $177 billion, 35% of the total estimated gross farm income in 2021.

The USDA's initial forecast for 2022 is a modest increase in export value, and through February 2022, agricultural exports are up 8%

in 2022 compared to 2021.

Disruptions to global grain supplies in Ukraine and Russia could boost demand for U.S.

agricultural products in 2022.

However, slower global growth could be a headwind for consumer-oriented products like animal proteins, dairy, fruits, and nuts.

However, because Farmer Mac has significant exposure to crop commodities like corn, soybeans, hay, wheat, and cotton, a sustained rally in agricultural commodities is likely to benefit Farmer Mac's overall portfolio credit quality more than degradation from downward pressure on livestock and consumer product profitability.

Severe weather conditions and long-term environmental change continue to shape agricultural sectors.

experienced 20 separate billion-dollar weather disasters in 2021, the second-highest level in the 40 years tracked by the National Oceanic and Atmospheric Administration behind 2020.

Many of those events affected agriculture, including a midwestern derecho, western wildfires, and western drought.

Federal crop insurance provides a strong mitigator against this risk, but farmers and ranchers face increasingly-severe weather incidents.

Weather conditions have also presented a challenge to many producers in 2021.

Long and persistent drought conditions have impacted western agriculture in the first three quarters of 2021.

As of October 19, 2021, 98% of the National Weather Service Western Region was designated as experiencing some level of drought or dryness, and 20% of the region was designated as experiencing exceptional drought, according to data from the National Drought Mitigation Center.

Due to drought conditions along the Colorado River Basin, the U.S.

Bureau of Reclamation mandated limits on water use along the river in August 2021 that will be effective for the 2022 water year.

Farmer Mac estimates that less than 2.5% of our Farm & Ranch portfolio is exposed to this water source.

Long and persistent drought conditions impacted western agriculture during much of 2021.

Although drought conditions improved in fourth quarter 2021 and early weeks of 2022, 20% of the continental U.S.

remained in exceptional or extreme drought as of April 19, 2022, according to data from the National Drought Mitigation Center.

Extended periods of drought and dryness can reduce agricultural productivity, cause lasting damage to permanent crops like fruit and tree nuts, and result in producers leaving some fields fallow due to lack of water.

States also regulate water use, and state laws like California's Sustainable Groundwater Management Act (SGMA) will continue to shape state-led efforts to manage water infrastructure and use.

Agricultural production in California, Oregon, Washington, Arizona, and Utah is likely to experience the greatest impact from the 2021 drought and future water management efforts.

Agricultural production in California, Oregon, Washington, Arizona, and Utah is likely to experience the greatest impact from the 2021 and 2022 droughts.

For loans in areas that commonly experience exceptional drought (primarily in California), Farmer Mac's underwriting process includes an assessment of anticipated long-term water availability for the related property and how that impacts the collateral value and borrower's cash flow position to mitigate that risk.

Due to improvements in sector profitability and despite weather challenges in the west, Farmer Mac's 90-day delinquencies and substandard assets levels improved in third quarter 2021 relative to third quarter 2020.

Forty percent of the loans past due 90-days or more in second quarter 2021 cured or paid off by September 30, 2021.

The overall delinquency rate fell from 0.70% of the Farm & Ranch portfolio as of June 30, 2021 to 0.58% of the Farm & Ranch portfolio by September 30, 2021, a significant improvement that defies the seasonal pattern historically observed during the third quarter of each year.

Year-over-year, the delinquency rate fell by 48 basis points from 1.07% in third quarter 2020.

However, the ongoing COVID-19 pandemic and the potential for continued economic and weather-related stress increase the level of uncertainty inherent in the agricultural credit sector and could alter the trajectory of the current agricultural cycle.

A virus resurgence, another economic disruption, continued or worsening supply chain disruptions, or long-term damage to secured collateral from drought or wildfires could result in elevated loan delinquencies and a higher percentage of loans rated substandard.

Farmer Mac believes that its portfolio continues to be highly diversified, both geographically and by commodity, and that its portfolio has been underwritten to high credit quality standards.

Therefore, Farmer Mac believes that its portfolio is well-positioned to endure reasonably foreseeable volatility from cyclical and external factors.

For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Farm & Ranch loans in Farmer Mac’s portfolio as of September 30, 2021, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

Rural Utilities Industry .

Economic conditions affecting the rural utilities industry tend to follow those in the general economy.

For more information about Farmer Mac's environmental risk mitigation requirements, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees—Environmental Considerations" in Farmer Mac's 2021 Annual Report.

Rural Infrastructure Industry .

Economic conditions affecting the rural infrastructure industry tend to follow those in the general economy.

According to data from the U.S.

Energy Information Administration, sales and the revenue from the sale of electricity to customers is up by 3.7% and 8.2%, respectively, in 2021 through July compared to 2020.

This increase was driven by higher sales to residential markets, a rebound in sales to the industrial sector, and an increase in the retail price of electricity.

Overall economic conditions continued to improve during the first three quarters of 2021, with improved employment, credit, and retail sales activity, but COVID-19 variants and higher inflation continue to threaten the depth and speed of the

economic recovery.

Through September 30, 2021, Farmer Mac had not observed material degradation in the financial performance of its Rural Utilities portfolio.

Prospects for loan growth within the rural utilities industry overall appear to be moderate in the near term, as ongoing normal-course capital expenditures related to maintaining and upgrading utility infrastructure continue at typical levels.

Farmer Mac's future growth opportunities for financing the electric cooperative industry may be affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the continuation of a low interest rate environment, and competitive dynamics within the rural utilities cooperative finance industry.

Energy Information Administration, sales and the revenue from the sale of electricity to customers increased by 2.3% and 8.8%, respectively, in the last 12 months through January 2022 compared to January 2021.

This increase was driven by a sharp recovery in sales to the commercial and industrial sectors and an increase in the retail price of electricity.

Several economic indicators remained positive in first quarter 2022, with improved employment, credit, and retail sales activity, but COVID-19 variants, trade disruptions, and higher inflation continue to impact economic activity.

Higher energy input prices such as natural gas and coal are a potential headwind for the industry in 2022.

Natural gas prices have risen consistently in late 2021 and early 2022 as a result of reduced supply and additional demand for U.S.

liquified natural gas from European countries.

Coal prices also trended higher in first quarter 2022, driven by higher natural gas prices and additional overseas demand to offset Russian coal exports.

Despite higher input costs, power producers are generally able to pass cost increases through higher retail electricity prices.

Through March 31, 2022, Farmer Mac had not observed material degradation in the financial performance of its rural infrastructure portfolio, and that portfolio has never experienced a serious delinquency or default since inception.

Prospects for loan growth within the rural infrastructure industry overall appear to be moderate in the near term, as ongoing normal-course capital expenditures related to maintaining and upgrading utility

infrastructure continue at typical levels.

Farmer Mac's future growth opportunities for financing the electric cooperative industry may be affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the continuation of a low interest rate environment compared to historical rates, and competitive dynamics within the rural utilities cooperative finance industry.

In December 2020, the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF) auction awarded $9.2 billion in broadband-related operating cost subsidies to winning bidders.

This may provide a catalyst for capital demands from rural electric cooperatives and other telecommunications companies providing communication services to rural America who seek to develop and deploy broadband services.

Over $1.5 billion in subsidies were awarded to various rural electric cooperatives, and a significant number of final allocations were made to other carriers investing in rural broadband and other communications services.

The cooperatives and other companies that were unsuccessful RDOF bidders also gained knowledge about the processes and technologies involved in broadband projects, which may enable them to develop broadband infrastructure.

In particular, these capital needs may provide Farmer Mac with new financing opportunities with existing and new customers.

As RDOF auction winners submit plans to the FCC and begin development, Farmer Mac could see increased lending activity for rural utilities providers.

In addition to RDOF broadband, Farmer Mac could see an increase in financing opportunities for other telecommunications providers in rural areas with wireless broadband increasingly important to economic opportunity and precision agriculture.

The growth in renewable energy generation and deployment of energy storage technologies may help deepen Farmer Mac's relationships with existing customers through new business opportunities.

This growth may also broaden Farmer Mac's customer base with cooperative lenders focused on lending to renewable energy customers.

According to data from the U.S.

Energy Information Administration, renewable electricity capacity is expected to grow by 48% in the next five years, compared to total electric capacity growth of 10%.

The rising cost of fossil fuel-based inputs combined with the falling costs of renewable power generation may hasten this increase in capacity.

This growth may broaden Farmer Mac's customer base with cooperative lenders focused on lending to renewable energy customers.

In response to this growth, Farmer Mac has deployed new financing products tailored to the renewable energy sector, which represents a new market opportunity for Farmer Mac.

Under this new initiative, Farmer Mac's total outstanding loan purchase balance of renewable energy financing transactions including undisbursed commitments as of September 30, 2021 was $92.7 million.

Under this new initiative, Farmer Mac's total outstanding loan purchase balance of renewable energy financing transactions was $92.2 million as of March 31, 2022.

Weather is an ongoing source of uncertainty for the utilities sector.

Drought, fires, and extreme storms can drive demand, outages, and damage to power and telecommunications facilities.

The recent drought and wildfires in California have not materially impacted Farmer Mac’s portfolio as of September 30, 2021, nor has damage from Hurricane Ida.

Farmer Mac continues to monitor the ongoing effects of the extremely cold weather event that occurred during mid-February 2021 in the mid-south region, particularly in Texas, on our rural infrastructure portfolio.

As of September 30, 2021, our rural infrastructure portfolio exposure in Texas was approximately $405 million and split between distribution and generation and transmission cooperatives.

Many of these cooperatives were affected in some way by the arctic freeze, including obstacles in receiving fuel for power plants or the inability to obtain contracted electricity, which resulted in rolling blackouts across the state.

In June 2021, the governor of Texas signed Texas Senate Bill 1580 into law allowing electric cooperatives impacted by the severe weather event to use securitization financing to recover the extraordinary costs and expenses incurred during the event.

We believe that the current internal risk ratings applied to our rural infrastructure portfolio reflect the elevated financial stress resulting from the Texas freeze and elevated energy costs.

Adverse weather can drive demand, outages, and damage to power and telecommunications facilities.

In February 2022, a Texas electric cooperative issued the first securitization financing to recover extraordinary costs arising from extreme weather events, showing a potential outlet for smoothing unpredictable and impactful weather events over future periods.

Farmer Mac believes that the current risk ratings applied to the Rural Infrastructure portfolio reflect any remaining financial stress resulting from recent weather events and elevated energy costs.

However, an increase in the frequency and severity of extreme weather events could elevate the probability of disruptions and credit stress in the future.

Legislative and Regulatory Outlook .

Farmer Mac continues to monitor potential legislative and regulatory changes that could affect Farmer Mac or its stakeholders, including:

• Section 1005 of the American Rescue Plan Act of 2021 authorized the USDA to provide debt relief to socially disadvantaged producers who had outstanding principal balances on Farm Service Agency (FSA) loans as of January 1, 2021.

In July, a federal judge issued a preliminary injunction

that ordered USDA to halt all payments under that debt relief program pending resolution of the constitutional objections raised against the program in ongoing litigation .

Congress has proposed replacing Section 1005 of the American Rescue Plan with a new program that provides debt relief to “economically distressed” and “at-risk” farmers in the Build Back Better reconciliation package pending in Congress.

If enacted, t his provision could lead to a short-term acceleration in the prepayment of the FSA guaranteed loans in Farmer Mac’s USDA Securities portfolio.

• The Build Back Better reconciliation package pending in Congress contains several proposed changes to the U.S.

As negotiations on the package move forward, Farmer Mac will continue to monitor the effect of any change to the tax code that may affect its business.

The proposed corporate alternative minimum tax in the package is not expected to change Farmer Mac’s tax liability in the near future.

The package does not include any proposed increases to the current U.S.

corporate tax rate of 21%.

The package includes a proposed 1% excise tax on the fair market value of a corporation’s stock repurchased in a taxable year.

That excise tax would apply to future repurchases of common stock under Farmer Mac’s existing stock buyback program that authorizes up to $9.8 million in repurchases of common stock and expires in March 2023.

Under that program, Farmer Mac has repurchased approximately $200,000 of common stock since January 1, 2017.

• Agricultural exports from the United States were valued at $145.7 billion in 2020.

• Farmer Mac is authorized to purchase certain U.S.

Department of Agriculture (USDA) loan guarantees, including those issued by the Farm Service Agency (FSA).

Section 1005 of the American Rescue Plan Act of 2021 allows the USDA to provide debt relief to socially disadvantaged producers who had outstanding principal balances on FSA direct and guaranteed loans as of January 1, 2021.

Multiple lawsuits have been filed challenging the constitutionality of the debt relief and delaying its implementation.

If ultimately implemented, this provision could lead to a short-term acceleration in the prepayment of the FSA guaranteed loans in Farmer Mac’s USDA Securities portfolio.

• Farmer Mac continues to monitor legislative developments that could lead to changes in the tax code that could affect Farmer Mac’s business.

Changes to the corporate tax rate (currently at 21%) have been proposed in recent years as a possible offset to increased federal spending.

Changes to the corporate tax rate may impact corporate earnings.

• The current farm bill is set to expire in 2023.

The farm bill is an omnibus piece of legislation that may impact several programs impacting farm profitability, the vitality of rural communities, and Farmer Mac’s charter.

The House and Senate Agriculture Committees began consideration of a new farm bill earlier this year.

Farmer Mac will continue to monitor this legislation for any impact it may have on Farmer Mac and farm profitability.

• Agricultural exports from the United States were valued at more than $177 billion in the 2021 fiscal year.

In 2021, Congress passed a $550 billion bipartisan infrastructure bill that provides for key investments to improve roads, bridges, freight rail, electric, broadband, ports, and waterways that are expected to support farmers and ranchers' profitability, competitiveness, and access to global markets.

The ability to produce food and fiber and transport it efficiently across the globe is critical for the U.S.

food and agricultural sectors' competitiveness internationally.

Congress recently passed a bipartisan infrastructure bill that contains several important investments to improve roads, bridges, freight rail, electric, broadband, ports, and waterways that are expected to support farmers and ranchers’ profitability, competitiveness, and access to global markets.

• The three-member board of the Farm Credit Administration (FCA) currently has a vacancy as well as a sitting member whose term expired in 2018.

The Biden Administration is expected to nominate individuals to fill these seats in the future.

Changes to the composition of the FCA board may affect Farmer Mac’s regulatory environment.

• The prudential regulator of Farmer Mac is expected to undergo significant changes to its board this year.

The three-member board of the Farm Credit Administration (FCA) currently has one vacant seat, a member whose term expired in 2018, and a third member whose term expires in May 2022.

The two current board members continue to serve until any proposed replacements for them are nominated by the President and confirmed by the U.S.

The Biden Administration recently announced a nominee to the vacant seat on the FCA board.

That nominee will need to be confirmed by the U.S.

Senate before officially joining the FCA board.

Farmer Mac will continue to monitor changes to the composition of the FCA board, as it may affect Farmer Mac's regulatory environment.

COVID-19 Pandemic .

While disruptions caused by COVID-19 have significantly moderated, recent and rapid increases in cases of COVID-19 resulting from variants of coronavirus demonstrates the volatility and uncertainty stemming from the pandemic.

Future variants and outbreaks may result in increased market volatility and supply chain disruptions similar to the market dislocations experienced in 2020 and 2021.

Farmer Mac's mission is to support rural America, and the disruptions caused by COVID-19 may continue to present new and expanded opportunities for Farmer Mac to help meet the financing needs of rural America while also presenting uncertainties and risks.

See "Risk Factors" in Part I, Item 1A of Farmer Mac's 2021 Annual Report for more information about the uncertainties and risks associated with the COVID-19 pandemic on Farmer Mac and its business.

Balance Sheet Review

The following table summarizes the balance sheet as of the periods indicated:

September 30, 2021 December 31, 2020 $ %

The following table summarizes Farmer Mac's balance sheet as of the periods indicated:

March 31, 2022 December 31, 2021 $ %

(in thousands)

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Total liabilities and equity $ 25,789,414 $ 25,145,491 $ 643,923 3 %

The increase in total assets was primarily attributable to new loan volume.

The increase in total assets was primarily attributable to a larger investment portfolio, new loan volume, and new Farmer Mac Guaranteed Securities loan volume.

Liabilities .

The increase in total liabilities was primarily due to an increase in total notes payable, to fund the acquisition of loan volume.

The increase in total equity was primarily due to the issuance of the Series G Preferred Stock, an increase in accumulated other comprehensive income, and an increase in retained earnings.

The increase in total liabilities was primarily due to an increase in other liabilities related to a $350 million AgVantage security that was traded, but did not yet settle, during first quarter 2022 and an increase in total notes payable to fund the acquisition of loan and Farmer Mac Guaranteed Securities volume.

The decrease in total equity was primarily due to a decrease in accumulated other comprehensive income, partially offset by an increase in retained earnings.

Risk Management

Credit Risk – Loans and Guarantees .

Farmer Mac's direct credit exposure to Farm & Ranch loans held and loans underlying Farm & Ranch Guaranteed Securities and LTSPCs as of September 30, 2021 was $9.4 billion across 48 states.

Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to Farm & Ranch loans, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information.

For larger loan exposures to agriculture production and agribusinesses that support agriculture production, food and fiber processing, and other supply chain production, which may have different risk profiles, Farmer Mac has implemented methodologies and parameters that help assess credit risk based on the appropriate sector, borrower construct, and transaction complexity.

For more information about Farmer Mac's underwriting and collateral valuation standards for Farm & Ranch loans, see

"Business—Farmer Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Standards" in Farmer Mac’s 2020 Annual Report.

Farmer Mac has indirect credit exposure to the Farm & Ranch loans that secure AgVantage securities included in the Institutional Credit line of business.

As of September 30, 2021, Farmer Mac had not experienced any credit losses on any AgVantage securities.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Institutional" for more information about Farmer Mac's credit risk on AgVantage securities.

Farmer Mac considers a loan's original loan-to-value ratio as one of many factors in evaluating loss severity.

Loan-to-value ratios depend on the market value of a property, as determined in accordance with Farmer Mac's collateral valuation standards.

As of September 30, 2021 and December 31, 2020, the average unpaid principal balances for loans outstanding in the Farm & Ranch line of business was $780,000 and $742,000, respectively.

Farmer Mac calculates the "original loan-to-value" ratio of a loan by dividing the original loan principal balance by the original appraised property value.

This calculation does not reflect any amortization of the original loan balance or any adjustment to the original appraised value to provide a current market value.

The original loan-to-value ratio of any cross-collateralized loans is calculated on a combined basis rather than on a loan-by-loan basis.

The weighted-average original loan-to-value ratio for Farm & Ranch loans purchased during third quarter 2021 was 51%, compared to 55% for loans purchased during third quarter 2020.

The weighted-average original loan-to-value ratio for all Farm & Ranch loans held and all loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was 53% and 52% as of September 30, 2021 and December 31, 2020.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 49% and 50% as of September 30, 2021 and December 31, 2020, respectively.

The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect amortization) for Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was 48% and 46% as of September 30, 2021 and December 31, 2020, respectively.

For more information about the credit quality of Farmer Mac's Farm & Ranch portfolio and the associated allowance for losses please refer to Note 5 to the consolidated financial statements.

Activity affecting the allowance for loan losses and reserve for losses is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Provision for and Release of Allowance for Loan Losses and Reserve for Losses."

Agricultural Finance - Direct Credit Exposure

Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of March 31, 2022 was $9.9 billion across 48 states.

Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to loan purchases, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information.

For Corporate AgFinance loans, which are often larger loan exposures to agriculture production and agribusinesses that support agriculture production, food and fiber processing, and other supply chain production, and which may have risk profiles that differ from smaller agricultural mortgage loans, Farmer Mac has implemented methodologies and parameters

that help assess credit risk based on the appropriate sector, borrower construct, and transaction complexity.

For more information about Farmer Mac's underwriting and collateral valuation standards for Agricultural Finance mortgage loans, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch" and "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance" in Farmer Mac's 2021 Annual Report.

Farmer Mac's 90-day delinquency measure includes loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy.

As of September 30, 2021, Farmer Mac's 90-day delinquencies were $54.8 million (0.58% of the Farm & Ranch portfolio), compared to $63.1 million (0.70% of the Farm & Ranch portfolio) as of June 30, 2021 and $46.2 million (0.54% of the Farm & Ranch portfolio) as of December 31, 2020.

Those 90-day delinquencies were comprised of 38 delinquent loans as of September 30, 2021, compared to 42 delinquent loans as of June 30, 2021 and 38 delinquent loans as of December 31, 2020.

The decrease in 90-day delinquencies from second quarter was primarily driven by two commodity groups – crops and livestock.

The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of September 30, 2021.

For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of March 31, 2022, were $55.8 million (0.57% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $47.3 million (0.48% of the Agricultural Finance mortgage loan portfolio) as of December 31, 2021.

Those 90-day delinquencies were comprised of 40 and 32 delinquent loans as of March 31, 2022 and December 31, 2021, respectively.

The increase in 90-day delinquencies was primarily driven by increased delinquencies in permanent plantings, storage and processing, and part-time farms, partially offset by decreased delinquencies in crops and livestock.

The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of March 31, 2022.

Farmer Mac believes that it remains adequately collateralized on its delinquent loans.

Our 90-day delinquency rate as of September 30, 2021 was below Farmer Mac's historical average.

Farmer Mac's 90-day delinquency rate as of March 31, 2022 was below Farmer Mac's historical average.

In the near-term, our delinquency rate may exceed our historical average due to the impact of adverse weather events and/or supply chain disruptions on the agricultural economy.

Farmer Mac's average 90-day delinquency rate as a percentage of its Farm & Ranch portfolio over the last 15 years is approximately 1%.

Farmer Mac's average 90-day delinquency rate as a percentage of its Agricultural Finance mortgage loan portfolio over the last 15 years is approximately 1%.

The highest 90-day delinquency rate observed during that period occurred in 2009 at approximately 2%, which coincided with increased delinquencies in loans within Farmer Mac's ethanol loan portfolio.

The following table presents historical information about Farmer Mac's 90-day delinquencies in the Farm & Ranch line of business compared to the unpaid principal balance of all Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs:

Farm & Ranch Line of Business 90-Day

The following table presents historical information about Farmer Mac's 90-day delinquencies in the Agricultural Finance mortgage loan portfolio compared to the unpaid principal balance of all Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure:

Agricultural Finance Mortgage Loans 90-Day

Delinquencies Percentage

(dollars in thousands)

September 30, 2021 $ 9,445,359 $ 54,792 0.58 %

June 30, 2021 9,056,152 63,076 0.70 %

March 31, 2022 $ 9,879,978 $ 55,847 0.57 %

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September 30, 2020 8,249,349 88,041 1.07 %

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.24% of total outstanding business volume as of September 30, 2021, compared to 0.21% as of December 31, 2020 and 0.40% as of September 30, 2020.

The following table presents outstanding Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities and 90-day delinquencies as of September 30, 2021 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

Farm & Ranch 90-Day Delinquencies as of September 30, 2021

Distribution of Farm & Ranch Line of Business Farm & Ranch Line of Business 90-Day Delinquencies (1)

June 30, 2020 8,017,850 68,682 0.86 %

March 31, 2020 7,811,594 79,722 1.02 %

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.23% of total outstanding business volume as of March 31, 2022, compared to 0.20% as of December 31, 2021 and 0.33% as of March 31, 2021.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of March 31, 2022 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

Agricultural Finance Mortgage Loans 90-Day Delinquencies as of March 31, 2022

Distribution of Agricultural Loans Agricultural Loans 90-Day Delinquencies (1)

(dollars in thousands)

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Total 100 % $ 9,879,978 $ 55,847 0.57 %

(1) Includes loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(1) Includes loans held and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(2) Geographic regions:

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(4) Includes aggregated loans to single borrowers or borrower-related entities.

Another indicator that Farmer Mac considers in analyzing the credit quality of its Farm & Ranch portfolio is the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding Farm & Ranch portfolio.

Another indicator that Farmer Mac considers in analyzing the credit quality of its Agricultural Finance mortgage loans is the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding portfolio.

Assets categorized as "substandard" have a well-defined weakness or weaknesses, and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

As of September 30, 2021, Farmer Mac's substandard assets were $278.3 million (2.9% of the Farm & Ranch portfolio), compared to $299.1 (3.3% of the Farm & Ranch portfolio) as of June 30, 2021 and $291.5 million (3.4% of the Farm & Ranch portfolio) as of December 31, 2020.

Those substandard assets were comprised of 291 loans as of September 30, 2021, 323 loans as of June 30, 2021, and 343 loans as of December 31, 2020.

The decrease of $20.8 million in substandard assets during third quarter 2021 was primarily driven by credit upgrades in both our on- and off-balance sheet portfolios during the quarter.

Substandard assets decreased as a percentage of the total on-balance sheet and off-balance sheet portfolios primarily due to these credit upgrades.

The percentage of substandard assets within the portfolio as of September 30, 2021 was below the historical average.

Farmer Mac's average substandard assets as a percentage of its Farm & Ranch portfolio over the last 15 years is approximately 4%.

As of March 31, 2022, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $215.8 million (2.2% of the portfolio), compared to $246.7 million (2.5% of the portfolio) as of December 31, 2021.

Those substandard assets comprised 254 loans as of March 31, 2022 and 274 loans as of December 31, 2021.

The decrease of $30.9 million in substandard assets during first quarter 2022 was driven by credit upgrades in both our on- and off-balance sheet portfolios.

Substandard assets decreased as a percentage of the total on- and off-balance sheet portfolios due to a combination of credit upgrades in both portfolios and growth in the on-balance sheet portfolio.

The percentage of substandard assets within the portfolio as of March 31, 2022 was below the historical average.

Farmer Mac's average substandard assets as a percentage of its Agricultural Finance mortgage loans over the last 15 years is approximately 4%.

The highest substandard asset rate observed during the last 15 years occurred in 2010 at approximately 8%, which coincided with an increase in substandard loans within Farmer Mac's ethanol portfolio.

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Although some credit losses are inherent to the business of agricultural lending, Farmer Mac believes that losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of its portfolio, which Farmer Mac believes is adequately collateralized.

The following table presents the current loan-to-value ratios for the Farm & Ranch portfolio, as disaggregated by internally assigned risk ratings:

Farm & Ranch current loan-to-value ratio by internally assigned risk rating as of September 30, 2021

Farmer Mac considers a loan's original loan-to-value ratio as one of many factors in evaluating loss severity.

Loan-to-value ratios depend on the market value of a property, as determined in accordance with Farmer Mac's collateral valuation standards.

As of March 31, 2022 and December 31, 2021, the average unpaid principal balances for Agricultural Finance mortgage loans outstanding and to which Farmer Mac has direct credit exposure was $786,000 and $790,000, respectively.

Farmer Mac calculates the "original loan-to-value" ratio of a loan by dividing the original loan principal balance by the original appraised property value.

This calculation does not reflect any amortization of the original loan balance or any adjustment to the original appraised value to provide a current market value.

The original loan-to-value ratio of any cross-collateralized loans is calculated on a combined basis rather than on a loan-by-loan basis.

The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans purchased during first quarter 2022 was 46%, compared to 53% for loans purchased during first quarter 2021.

The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 52% as of both March 31, 2022 and December 31, 2021.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 51% as of both March 31, 2022 and December 31, 2021.

The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect amortization) for Agricultural Finance mortgage loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 47% as of both March 31, 2022 and December 31, 2021.

The following table presents the current loan-to-value ratios for the Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, as disaggregated by internally assigned risk ratings:

Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of March 31, 2022

Acceptable Special Mention Substandard Total

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Total $ 9,311,436 $ 352,723 $ 215,819 $ 9,879,978

(1) The current loan-to-value ratio is based on original appraised value (or most recently obtained appraisal, if available) and current outstanding loan amount adjusted to reflect loan amortization.

The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Farm & Ranch loans purchased and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities as of September 30, 2021 by year of origination, geographic region, and commodity/collateral type.

(1) The current loan-to-value ratio is based on original appraised value (or most recently obtained valuation, if available) and current outstanding loan amount adjusted to reflect loan amortization.

The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Agricultural Finance mortgage loans as of March 31, 2022 by year of origination, geographic region, and commodity/collateral type.

The purpose of this information is to present information about realized losses relative to original Farm & Ranch purchases, guarantees, and commitments.

Farm & Ranch Credit Losses Relative to Cumulative

Original Loans, Guarantees, and LTSPCs as of September 30, 2021

Agricultural Finance Mortgage Loans Credit Losses Relative to Cumulative

Original Loans, Guarantees, and LTSPCs as of March 31, 2022

Cumulative Original Loans, Guarantees and LTSPCs Cumulative Net Credit Losses/(Recoveries) Cumulative Loss Rate

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Analysis of portfolio performance indicates that commodity type is the primary determinant of Farmer Mac's exposure to loss on a given loan.

The following tables present concentrations of Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities by commodity type within geographic region and cumulative credit losses by origination year and commodity type:

As of September 30, 2021

Farm & Ranch Concentrations by Commodity Type within Geographic Region

The following tables present concentrations of Agricultural Finance mortgage loans by commodity type within geographic region and cumulative credit losses by origination year and commodity type:

As of March 31, 2022

Agricultural Finance Mortgage Loans Concentrations by Commodity Type within Geographic Region

Crops Permanent

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Southeast (AL, FL, GA, MS, NC, SC, TN).

As of September 30, 2021

Farm & Ranch Cumulative Credit Losses by Origination Year and Commodity Type

As of March 31, 2022

Agricultural Loans Cumulative Credit Losses by Origination Year and Commodity Type

Crops Permanent

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Total $ 2,971 $ 9,783 $ 3,836 $ 1,090 $ 19,984 $ 37,664

Rural Utilities

Farmer Mac's direct credit exposure to Rural Utilities loans held and loans underlying LTSPCs as of September 30, 2021 was $2.8 billion across 45 states.

For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Utilities loans, see "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting" in Farmer Mac’s 2020 Annual Report.

As of September 30, 2021, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans.

Farmer Mac has indirect credit exposure to Rural Utilities loans that secure AgVantage securities included in the Institutional Credit line of business.

As of September 30, 2021, Farmer Mac had not experienced any credit losses on any AgVantage securities.

For more information about the credit quality of Farmer Mac's Agricultural Finance mortgage loans and the associated allowance for losses please refer to Note 5 and Note 6 to the consolidated financial statements.

Rural Infrastructure Finance - Direct Credit Exposure

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of March 31, 2022 was $3.1 billion across 45 states.

For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Infrastructure Finance loans, see "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Underwriting and Collateral Standards" in Farmer Mac’s 2021 Annual Report.

As of March 31, 2022, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

Farmer Mac evaluates credit risk for these assets by reviewing a variety of borrower credit risk characteristics.

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The following table presents Farmer Mac’s portfolio of generation and transmission ("G&T") and distribution cooperative borrowers, as well as renewable energy loans, disaggregated by internally assigned risk ratings.

Rural Utilities portfolio by internally assigned risk rating as of September 30, 2021

Rural Infrastructure Finance portfolio by internally assigned risk rating as of March 31, 2022

Acceptable Special Mention Substandard Total

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Rural Utilities Total $ 3,114,419 $ — $ — $ 3,114,419

For more information about the credit quality of Farmer Mac's Rural Utilities portfolio and the associated allowance for losses please refer to Notes 5 and 6 of the consolidated financial statements.

For more information about the credit quality of Farmer Mac's Rural Infrastructure Finance portfolio and the associated allowance for losses please refer to Notes 5 and 6 of the consolidated financial statements.

Other Considerations Regarding Credit Risk Related to Loans and Guarantees

The credit exposure on USDA Securities, including those underlying Farmer Mac Guaranteed USDA Securities, is guaranteed by the full faith and credit of the United States.

Therefore, Farmer Mac believes that we have little or no credit risk exposure in the USDA Guarantees line of business because of the USDA guarantee.

As of September 30, 2021, Farmer Mac had not experienced any credit losses on any securities under the USDA Guarantees line of business and does not expect to incur any such losses in the future.

Therefore, Farmer Mac believes that we have little or no credit risk exposure to the USDA Securities in the Agricultural Finance line of business because of the USDA guarantee.

As of March 31, 2022, Farmer Mac had not experienced any credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities and does not expect to incur any such losses in the future.

Because we do not expect credit losses on this portfolio, Farmer Mac does not provide an allowance for losses on its portfolio of USDA Securities.

Farmer Mac requires most approved lenders to make representations and warranties about the conformity of eligible agricultural mortgage and Rural Utilities loans to Farmer Mac's standards, the accuracy of loan data provided to Farmer Mac, and other requirements related to the loans.

Farmer Mac requires many lenders to make representations and warranties about the conformity of Agricultural Finance mortgage loans and Rural Infrastructure Finance loans to Farmer Mac's standards, the accuracy of loan data provided to Farmer Mac, and other requirements related to the loans.

Sellers who make these representations and warranties are responsible to Farmer Mac for breaches of those representations and warranties.

Farmer Mac has the ability to require a seller to cure, replace, or repurchase a loan sold or transferred to Farmer Mac if any breach of a representation or warranty is discovered that was material to Farmer Mac's decision to purchase the loan or that directly or indirectly causes a default or potential loss on a loan sold or transferred by the seller to Farmer Mac.

During the previous three years ended September 30, 2021, there have been no breaches of representations and warranties by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan.

In addition to relying on the representations and warranties of sellers, Farmer Mac also underwrites the agricultural real estate mortgage loans (other than rural housing and part-time farm mortgage loans) and Rural Utilities loans on which it has direct credit exposure.

During the previous three years ended March 31, 2022, there have been no breaches of representations and warranties by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan.

In addition to relying on the representations and warranties of sellers, Farmer Mac also underwrites the Agricultural Finance mortgage loans (other than rural housing and part-time farm mortgage loans) and Rural Infrastructure Finance loans on which it has direct credit exposure.

For rural housing and part-time farm mortgage loans, Farmer Mac relies on representations and warranties from the seller that those loans conform to Farmer Mac's specified underwriting criteria.

For more information about Farmer Mac's loan eligibility requirements and underwriting standards, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Loan Eligibility," "Business—Farmer Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Standards," "Business—Farmer Mac's Lines of Business—Rural Utilities—Loan Eligibility," and "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting and Collateral Standards" in Farmer Mac’s 2020 Annual Report.

For more information about Farmer Mac's loan eligibility requirements and underwriting standards, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Eligibility," "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch," "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance," and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Underwriting and Collateral Standards" in Farmer Mac’s 2021 Annual Report.

Under contracts with Farmer Mac and in consideration for servicing fees, Farmer Mac-approved servicers service loans in accordance with Farmer Mac's requirements.

Servicers are responsible to Farmer Mac for serious errors in the servicing of those loans.

If a servicer materially breaches the terms of its servicing agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without Farmer Mac's consent, or experiences insolvency or bankruptcy, the servicer is responsible for any

corresponding damages to Farmer Mac and, in most cases, Farmer Mac has the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the servicer.

If a servicer materially breaches the terms of its servicing agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without

Farmer Mac's consent, or experiences insolvency or bankruptcy, the servicer is responsible for any corresponding damages to Farmer Mac and, in most cases, Farmer Mac has the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the servicer.

Farmer Mac also can proceed against the servicer in arbitration or exercise any remedies available to it under law.

During the previous three years ended September 30, 2021, Farmer Mac had not exercised any remedies or taken any formal action against any servicers.

For more information about Farmer Mac's servicing requirements, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Servicing" and "Business—Farmer Mac's Lines of Business—Rural Utilities—Servicing" in Farmer Mac’s 2020 Annual Report.

Credit Risk – Institutional .

During the previous three years ended March 31, 2022, Farmer Mac had not exercised any remedies or taken any formal action against any servicers.

For more information about Farmer Mac's servicing requirements, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Servicing" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing" in Farmer Mac’s 2021 Annual Report.

Credit Risk – Counterparty Risk .

Farmer Mac is exposed to credit risk arising from its business relationships with other institutions, which include:

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In the event of a default on an AgVantage security, Farmer Mac would have recourse to the pledged collateral and have rights to the ongoing borrower payments of principal and interest.

For Farm Equity AgVantage counterparties and smaller financial funds or entities, Farmer Mac also requires that the counterparty generally (1) maintain a higher collateralization level either through a higher overcollateralization percentage or through lower loan-to-value ratio thresholds and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default.

For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Institutional Credit" in Farmer Mac's 2020 Annual Report.

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Farm & Ranch line of business totaled $4.8 billion as of September 30, 2021 and $5.2 billion as of December 31, 2020.

The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Utilities line of business totaled $3.4 billion as of September 30, 2021 and $2.6 billion as of December 31, 2020.

The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $4.4 million as of both September 30, 2021 and December 31, 2020.

The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of September 30, 2021 and December 31, 2020:

As of September 30, 2021 As of December 31, 2020

As a result, Farmer Mac has indirect credit exposure to the Agricultural Finance mortgage loans and Rural Utilities loans that secure AgVantage securities.

For AgVantage counterparties that are institutional real estate investors or financial funds and other similar entities, Farmer Mac also typically requires that the counterparty (1) maintain a higher collateralization level, through either a higher overcollateralization percentage or lower loan-to-value ratio thresholds and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default.

As of March 31, 2022, Farmer Mac had not experienced any credit losses on any AgVantage securities.

For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Other Products – Agricultural Finance—AgVantage Securities" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Other Products – Rural Infrastructure Finance—AgVantage Securities" in Farmer Mac's 2021 Annual Report.

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $5.5 billion as of March 31, 2022 and $5.1 billion as of December 31, 2021.

The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Infrastructure Finance line of business totaled $3.0 billion as of both March 31, 2022 and December 31, 2021.

The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $2.8 million as of both March 31, 2022 and December 31, 2021.

The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of March 31, 2022 and December 31, 2021:

As of March 31, 2022 As of December 31, 2021

Counterparty Balance Required Collateralization Balance Required Collateralization

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800,262 106% to 125% 492,464 106% to 125%

Farm Equity AgVantage (2)

187,336 110% 192,456 110%

Total outstanding $ 8,542,898 $ 8,128,481

(1) Consists of AgVantage securities issued by 9 and 6 different issuers as of September 30, 2021 and December 31, 2020, respectively.

(2) Consists of AgVantage securities issued by 4 and 4 different issuers as of September 30, 2021 and December 31, 2020, respectively.

(1) Consists of AgVantage securities issued by 13 different issuers as of both March 31, 2022 and December 31, 2021.

Farmer Mac manages institutional credit risk related to lenders and servicers by requiring those institutions to meet Farmer Mac's standards for creditworthiness.

Farmer Mac monitors the financial condition of those institutions by evaluating financial statements and credit rating agency reports.

For more information about Farmer Mac's lender eligibility requirements, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Lenders" and "Business—Farmer Mac's Lines of Business—Rural Utilities—Lenders" in Farmer Mac's 2020 Annual Report.

For more information about Farmer Mac's lender eligibility requirements, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Lenders" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing" in Farmer Mac’s 2021 Annual Report.

Farmer Mac manages institutional credit risk related to its interest rate swap counterparties through collateralization provisions contained in each of its swap agreements that vary based on the market value of its swap portfolio with each counterparty.

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Credit Risk – Other Investments .

As of September 30, 2021, Farmer Mac had $0.9 billion of cash and cash equivalents and $3.7 billion of investment securities.

The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as FCA regulations that establish criteria for investments eligible for Farmer Mac's investment portfolio, including limitations on asset class, dollar amount, issuer concentration, and credit quality (the "Liquidity and Investment Regulations").

As of March 31, 2022, Farmer Mac had $0.9 billion of cash and cash equivalents and $4.2 billion of investment securities.

The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as FCA regulations found at 12 C.F.R.

§§ 652.1-652.45 (the "Liquidity and Investment Regulations").

In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets.

The Liquidity and Investment Regulations and Farmer Mac's internal policies require that investments held in Farmer Mac's investment portfolio meet the following creditworthiness standards:

minimum, at least one obligor of the investment must have a very strong capacity to meet financial commitments for the life of the investment, even under severely adverse or stressful conditions, and generally present a very low risk of default;

(2) if the obligor whose capacity to meet financial commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of the United States, the investment must also be fully guaranteed by a U.S.

(1) at a minimum, at least one obligor of the investment must have a very strong capacity to meet financial commitments for the life of the investment, even under severely adverse or stressful conditions, and generally present a very low risk of default;

(2) if the obligor whose capacity to meet financial

commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of the United States, the investment must also be fully guaranteed by a U.S.

government agency;

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The Liquidity and Investment Regulations and Farmer Mac's internal policies also establish concentration limits, which are intended to limit exposure to any single entity, issuer, or obligor.

The Liquidity and Investment Regulations limit Farmer Mac's total credit exposure to any single entity, issuer, or obligor of securities to 10% of Farmer Mac's regulatory capital ($119.6 million as of September 30, 2021).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($59.8 million as of September 30, 2021).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($62.4 million as of March 31, 2022).

These exposure limits do not apply to obligations of U.S.

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Interest Rate Risk .

Farmer Mac is subject to interest rate risk on all funded financial assets on its balance sheet because of timing differences in the cash flows due to maturity, paydown, or repricing of the assets and debt together with financial derivatives.

Farmer Mac is subject to interest rate risk on all interest-earning assets on its balance sheet because of timing differences in the cash flows due to maturity, paydown, or repricing of the assets and debt together with financial derivatives.

Cash flow mismatches due to changing interest rates can reduce the earnings of Farmer Mac if assets prepay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments when Farmer Mac's funding costs cannot be correspondingly reduced.

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The goal of interest rate risk management at Farmer Mac is to manage the balance sheet in a manner that generates stable earnings and value across a variety of interest rate environments.

Recognizing that interest rate sensitivities may change with the passage of time and as interest rates change, Farmer Mac regularly assesses this exposure and, if necessary, adjusts its portfolio of funded financial assets, debt, and financial derivatives.

Recognizing that interest rate sensitivities may change with the passage of time and as interest rates change, Farmer Mac regularly assesses this exposure and, if necessary, adjusts its portfolio of interest-earning assets, debt, and financial derivatives.

Farmer Mac's objective is to maintain its exposure to interest rate risk within appropriate limits, as approved by Farmer Mac's board of directors.

Farmer Mac's management-level Asset and Liability Committee ("ALCO") provides oversight, establishes guidelines, and approves strategies to maintain interest rate risk within the board-established limits.

Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt that together with financial derivatives have similar duration and convexity characteristics and help to mitigate impacts from interest rate changes across the yield curve.

As part of this debt issuance strategy, Farmer

Mac seeks to issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows.

Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt that together with financial derivatives have similar duration and convexity characteristics and help mitigate impacts from interest rate changes across the yield curve.

As part of this debt issuance strategy, Farmer Mac seeks to issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows.

Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of maturities to execute its debt issuance strategy.

Callable debt is issued to mitigate prepayment risk associated with certain funded financial assets held on balance sheet.

Callable debt is issued to mitigate prepayment risk associated with certain interest-earning assets held on balance sheet.

In general, as interest rates decline, prepayments typically increase, and Farmer Mac is able to economically extinguish certain callable debt issuances.

In addition, Farmer Mac enters into financial derivatives, primarily interest rate swaps, to better match the durations of Farmer Mac's assets and liabilities, thereby reducing overall sensitivity to changing interest rates.

Taking into consideration the prepayment provisions and the default probabilities associated with its portfolio of funded financial assets, Farmer Mac incorporates behavioral prepayment models when projecting and valuing cash flows associated with these assets.

Taking into consideration the prepayment provisions and the default probabilities associated with its portfolio of interest-earning assets, Farmer Mac incorporates behavioral prepayment models when projecting and valuing cash flows associated with these assets.

In recognition that borrowers' behaviors in various interest rate environments may change over time, Farmer Mac periodically evaluates the effectiveness of these models compared to actual prepayment experience and adjusts and refines the models as necessary to improve the precision of future prepayment forecasts.

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Treasury securities and other financial derivatives.

Farmer Mac's $0.9 billion of cash and cash equivalents mature within three months and are generally funded with debt having similar maturities.

As of September 30, 2021, $3.0 billion of the $3.7 billion of investment securities (80%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year.

Farmer Mac's floating rate investment securities are funded with floating rate debt that closely matches the rate adjustment frequency of the associated investments.

Farmer Mac's $0.9 billion of cash and cash equivalents held as of March 31, 2022 mature within three months.

As of March 31, 2022, $3.1 billion of the $4.2 billion of investment securities (74%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year.

Farmer Mac's floating rate investment securities are funded with floating rate debt.

The fixed rate investment securities are generally funded in a manner consistent with Farmer Mac's overall funding strategy that approximates a duration and convexity match.

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Farmer Mac regularly evaluates and conducts interest rate shock simulations on its portfolio of financial assets, debt, and financial derivatives and examines a variety of metrics to quantify and manage its exposure to interest rate risk.

These metrics include sensitivity to interest rate movements on the market value of equity ("MVE") and forecasted net effective spread ("NES") as well as duration gap analysis.

These metrics include sensitivity to interest rate movements on the market value of equity ("MVE") and forecasted net effective spread ("NES") as well as a duration gap analysis.

MVE represents management's estimate of the present value of all future cash flows from its current portfolio of on- and off-balance sheet assets, liabilities, and financial derivatives, discounted at current interest rates and appropriate spreads.

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Duration is a measure of a financial instrument's fair value sensitivity to small changes in interest rates.

Duration gap is calculated using the net estimated durations of Farmer Mac's funded financial assets, debt, and financial derivatives.

Duration gap quantifies the extent to which estimated fair value sensitivities are matched for funded financial assets, debt and financial derivatives..

Duration gap is calculated using the net estimated durations of Farmer Mac's interest-earning assets, debt, and financial derivatives.

Duration gap quantifies the extent to which estimated fair value sensitivities are matched for interest-earning assets, debt and financial derivatives.

Duration gap provides a relatively concise measure of the interest rate risk inherent in Farmer Mac's outstanding portfolio.

A positive duration gap denotes that the duration of Farmer Mac's funded financial assets is greater than the duration of its debt and financial derivatives.

A positive duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's funded financial assets is more sensitive than the fair value change of its debt and financial derivatives.

Conversely, a negative duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's funded financial assets are less sensitive than the fair value change of its debt and financial derivatives.

A duration gap of zero indicates that with small changes in interest rate movements the fair value change of Farmer Mac's funded financial assets is effectively offset by the fair value change of its debt and financial derivatives.

Each of the interest rate risk metrics is quantified using asset/liability models and derived based on management's best estimates of factors such as forward interest rates across the yield curve, interest rate volatility, and timing of asset prepayments and callable debt redemptions.

A positive duration gap denotes that the duration of Farmer Mac's interest-earning assets is greater than the duration of its debt and financial derivatives.

A positive duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's interest-earning assets is more sensitive than the fair value change of its debt and financial derivatives.

Conversely, a negative duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's interest-earning assets are less sensitive than the fair value change of its debt and financial derivatives.

A duration gap of zero indicates that with small changes in interest rate movements the fair value change of Farmer Mac's interest-earning assets is effectively offset by the fair value change of its debt and financial derivatives.

Each of the interest rate risk metrics is quantified using asset/liability models and derived based on management's best estimates of factors such as implied forward interest rates across the yield curve, interest rate volatility, and timing of asset prepayments and callable debt redemptions.

Accordingly, these metrics are estimates rather than precise measurements.

Actual results may differ to the extent there are material changes to Farmer Mac's financial asset portfolio or changes in funding or hedging strategies undertaken to mitigate unfavorable sensitivities to interest rate changes.

The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of September 30, 2021 and December 31, 2020 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of March 31, 2022 and December 31, 2021 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

Percentage Change in MVE from Base Case

Interest Rate Scenario (1)

As of September 30, 2021 As of December 31, 2020 (1)

As of March 31, 2022 As of December 31, 2021 (1)

+100 basis points 1.1 % 3.7 %

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Percentage Change in NES from Base Case

Interest Rate Scenario As of September 30, 2021 As of December 31, 2020 (1)

Interest Rate Scenario As of March 31, 2022 As of December 31, 2021 (1)

+100 basis points 3.4 % 6.6 %

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(1) The down 100 basis points shock scenario was replaced in 2020 with a proportional shock relative to 50% of the 3-month Treasury bill rate, with the approval of the Financial Risk Committee of the Board of Directors.

The replacement down shock scenario was negative 2 basis point as of September 30, 2021 and negative 4 basis points as of December 31, 2020.

As of September 30, 2021, Farmer Mac's effective duration gap was negative 1.3 months, compared to negative 1.6 months as of December 31, 2020.

Farmer Mac updated its duration gap measure to funded assets, debt, and financial derivatives as of December 31, 2020.

Interest rates within the yield curve steepened significantly during the first nine months of 2021 with the 2-year and 10-year U.S.

The replacement down shock scenario was negative 25 basis points as of March 31, 2022 and negative 2 basis points as of December 31, 2021.

As of March 31, 2022, Farmer Mac's duration gap was positive 0.2 months, compared to negative 1.5 months as of December 31, 2021.

Farmer Mac updated its duration gap measure to interest-earning assets, debt, and financial derivatives as of December 31, 2021.

Interest rates within the yield curve increased significantly during first quarter 2022 with the 2-year and 10-year U.S.

Treasury Note yield-to-maturity increasing by approximately 160 basis points and 83 basis points, respectively, versus year-end 2021.

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The economic effects of financial derivatives are included in Farmer Mac's MVE, NES, and duration gap analyses.

Farmer Mac enters into the following types of financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of funded financial assets, future cash flows, and debt issuance, and not for trading or speculative purposes:

Farmer Mac typically enters into the following types of financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of interest-earning assets, future cash flows, and debt issuance, and not for trading or speculative purposes:

• "pay-fixed" interest rate swaps, in which Farmer Mac pays fixed rates of interest to, and receives floating rates of interest from, counterparties;

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Treasury securities.

As of September 30, 2021, Farmer Mac had $15.8 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to thirty years, of which $6.1 billion were pay-fixed interest rate swaps, $7.6 billion were receive-fixed interest rate swaps, and $2.1 billion were basis swaps.

Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration characteristics of its funded financial assets with those of its debt.

As of March 31, 2022, Farmer Mac had $18.9 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $8.1 billion were pay-fixed interest rate swaps, $9.5 billion were receive-fixed interest rate swaps, and $1.4 billion were basis swaps.

Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration characteristics of its interest-earning assets with those of its debt.

For example, Farmer Mac transacts pay-fixed interest rate swaps and issues floating rate debt to effectively create fixed rate funding that approximately matches the duration of the corresponding fixed rate assets being funded.

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As discussed in Note 4 to the consolidated financial statements, all financial derivatives are recorded on the balance sheet at fair value as derivative assets or as derivative liabilities.

Changes in the fair values of undesignated financial derivatives are reported in "Losses on financial derivatives" in the consolidated statements of operations.

Changes in the fair values of undesignated financial derivatives are reported in "Gains on financial derivatives" in the consolidated statements of operations.

For financial derivatives designated in fair value hedge accounting relationships, changes in the fair values of the hedged items related to the risk being hedged are reported in "Net interest income" in the consolidated statements of operations.

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All of Farmer Mac's interest rate swap transactions are conducted under standard collateralized agreements that limit Farmer Mac's potential credit exposure to any counterparty.

As of both September 30, 2021 and December 31, 2020, Farmer Mac had no uncollateralized net exposures.

As of both March 31, 2022 and December 31, 2021, Farmer Mac had no uncollateralized net exposures based on the mark-to-market value of the portfolio of interest rate swaps

Re-funding and repricing risk

Farmer Mac is subject to re-funding and repricing risk on any floating rate assets that are not funded to contractual maturity.

Re-funding and repricing risk arises from potential changes in funding costs when Farmer Mac funds floating rate, or synthetic floating rate, assets with floating rate debt with shorter maturities.

Re-funding and repricing risk arises from potential changes in funding costs resulting from a funding strategy whereby Farmer Mac issues floating rate debt across a variety of maturities to fund floating rate or synthetically floating rate assets that on average may have longer maturities.

Changes in Farmer Mac's funding costs relative to the benchmark market index rate to which the assets are indexed can cause changes to net interest income when debt matures and is reissued at then current interest rates to continue funding those assets.

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To meet certain floating rate funding needs, Farmer Mac frequently issues shorter-term floating-rate medium-term notes or fixed rate medium-term notes paired with a received-fixed interest rate swap because these funding alternatives generally provide a lower cost of funding while generating an effective interest rate match.

As funding for these floating rate assets matures, Farmer Mac seeks to refinance the debt associated with these assets in a similar fashion to achieve an appropriate interest rate risk sensitivity match in the context of Farmer Mac's overall debt issuance and liquidity management strategies.

As funding for these floating rate assets matures, Farmer Mac seeks to refinance the debt associated with these assets in a similar fashion to achieve an appropriate interest rate match in the context of Farmer Mac's overall debt issuance and liquidity management strategies.

However, if the funding cost of Farmer Mac’s discount notes or medium-term notes increased relative to the benchmark market index of the associated assets during the time between when these floating rate assets were first funded and when Farmer Mac refinanced the associated debt, Farmer Mac would be exposed to a commensurate reduction of net effective spread.

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Farmer Mac regularly adjusts its funding strategies to mitigate the effects of interest rate variability and seeks to maintain an effective mixture of funding structures in the context of its overall liability management and liquidity management strategies.

As of September 30, 2021, Farmer Mac held $5.5 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as LIBOR or SOFR.

As of the same date, Farmer Mac also had $6.1 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily LIBOR.

As of March 31, 2022, Farmer Mac held $5.1 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as LIBOR or SOFR.

As of the same date, Farmer Mac also had $8.1 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily LIBOR or SOFR.

Discontinuation of LIBOR

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Farmer Mac is evaluating the potential effect on our business of the replacement of the LIBOR benchmark interest rate, including the possibility of replacement benchmark interest rates.

As of September 30, 2021, Farmer Mac held $3.9 billion of floating rate assets in its lines of business and its investment portfolio, had issued $2.2 billion of floating rate debt, and had entered into $14.3 billion notional amount of interest rate swaps, each of which reset based on LIBOR.

As of March 31, 2022, Farmer Mac held $3.2 billion of floating rate assets in its lines of business and its investment portfolio, had issued $0.3 billion of floating rate debt, and had entered into $12.9 billion notional amount of interest rate swaps, each of which reset based on LIBOR.

In addition, our Non-Cumulative Series C Preferred Stock currently pays a fixed rate of interest until July 17, 2024.

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The market transition away from LIBOR and towards alternative benchmark interest rate indices that may be developed is expected to be complicated and may require the development of term and credit adjustments to accommodate for differences between the benchmark interest rate indices.

The transition

may also result in different financial performance for existing transactions, require different hedging strategies, or require renegotiation of existing transactions.

As of September 30, 2021, we had $0.8 billion outstanding in medium-term notes based on SOFR, a potential alternative benchmark interest rate index.

The transition may also result in different financial performance for existing transactions, require different hedging strategies, or require renegotiation of existing transactions.

As of March 31, 2022, we had $1.8 billion outstanding in medium-term notes based on SOFR, a potential alternative benchmark interest rate index.

Liquidity and Capital Resources

Farmer Mac's primary sources of funds to meet its liquidity and funding needs are the proceeds of its debt issuances, guarantee and commitment fees, net effective spread, loan repayments, and maturities of AgVantage securities.

Farmer Mac regularly accesses the capital markets for funding, and Farmer Mac has maintained access to the capital markets at favorable interest rates throughout the first three quarters of 2021.

Farmer Mac funds its purchases of eligible loan assets, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets and finances its operations primarily by issuing debt obligations of various maturities in the public capital markets.

As of September 30, 2021, Farmer Mac had outstanding discount notes of $2.4 billion, medium-term notes that mature within one year of $5.7 billion, and medium-term notes that mature after one year of $14.3 billion.

Assuming continued access to the capital markets, Farmer Mac believes it has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future.

Farmer Mac has a contingency funding plan to manage unanticipated disruptions in its access to the capital markets.

Farmer Mac regularly accesses the debt capital markets for funding, and Farmer Mac has maintained access to the debt capital markets at relatively favorable interest rates throughout first quarter 2022.

As of March 31, 2022, Farmer Mac had outstanding discount notes of $1.9 billion, medium-term notes that mature within one year of $4.7 billion, and medium-term notes that mature after one year of $16.7 billion.

Assuming continued access to the debt capital markets, Farmer Mac believes it has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future.

Farmer Mac has a contingency funding plan to manage unanticipated disruptions in its access to the debt capital markets.

Farmer Mac must maintain a minimum of 90 days of liquidity under the Liquidity and Investment Regulations prescribed for Farmer Mac by FCA.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 279 days of liquidity during third quarter 2021 and had 266 days of liquidity as of September 30, 2021.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 408 days of liquidity during first quarter 2022 and had 416 days of liquidity as of March 31, 2022.

Farmer Mac maintains cash, cash equivalents (including U.S.

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• mortgage-backed securities.

The following table presents these assets as of September 30, 2021 and December 31, 2020:

As of September 30, 2021 As of December 31, 2020

The following table presents these assets as of March 31, 2022 and December 31, 2021:

As of March 31, 2022 As of December 31, 2021

(in thousands)

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Total $ 5,130,330 $ 4,790,146

The objective of the investment portfolio as of September 30, 2021 and December 31, 2020 was to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth.

The objective of the investment portfolio as of March 31, 2022 and December 31, 2021 was to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth.

Capital Requirements .

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Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital requirement.

As of September 30, 2021, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level).

As of March 31, 2022, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level).

In accordance with FCA's rule on capital planning, Farmer Mac's board of directors has adopted a policy for maintaining a sufficient level of "Tier 1" capital (consisting of retained earnings, paid-in capital, common stock, and qualifying preferred stock).

That policy restricts Tier 1-eligible dividends and any discretionary bonus payments if Tier 1 capital falls below specified thresholds.

As of September 30, 2021 and December 31, 2020, Farmer Mac's Tier 1 capital ratio was 15.1% and 14.1%, respectively.

The increase in our Tier 1 capital ratio was due to that fact that capital growth, which reflects the issuance of the Series G Preferred Stock, outpaced the growth in risk-weighted assets during the first half of 2021.

As of September 30, 2021, Farmer Mac was in compliance with its capital adequacy policy.

As of March 31, 2022 and December 31, 2021, Farmer Mac's Tier 1 capital ratio was 15.0% and 14.7%, respectively.

The increase in our Tier 1 capital ratio was due to that fact that capital growth, driven by increases in retained earnings, outpaced the growth in risk-weighted assets during first quarter 2022.

As of March 31, 2022, Farmer Mac was in compliance with its capital adequacy policy.

Farmer Mac does not expect its compliance on an ongoing basis with FCA's rule on capital planning, including Farmer Mac's policy on Tier 1 capital, to materially affect Farmer Mac's operations or financial condition.

For more information about the capital requirements applicable to Farmer Mac, its capital adequacy policy, and FCA's rule on capital planning, see "Business—Government Regulation of Farmer Mac—Capital Standard" in Farmer Mac's 2020 Annual Report.

See Note 8 to the consolidated financial statements for more information about Farmer Mac's capital position.

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New Business Volume

Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit

Loans LTSPCs USDA Securities Loans LTSPCs AgVantage Total

Agricultural Finance Rural Infrastructure Finance

Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Total

(in thousands)

For the quarter ended:

September 30, 2021 $ 617,557 $ 313,116 $ 114,120 $ 63,897 $ 50,000 $ 1,368,912 $ 2,527,602

June 30, 2021 650,436 241,387 100,469 39,107 — 468,616 1,500,015

March 31, 2022 $ 2,452,539 $ 103,353 $ 377,965 $ 41,636 $ 2,975,493

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September 30, 2020 1,059,891 212,829 52,300 10,000 1,335,020

June 30, 2020 1,069,693 279,021 358,866 — 1,707,580

March 31, 2020 768,700 165,128 392,668 10,000 1,336,496

For the year ended:

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December 31, 2020 3,805,600 899,372 949,250 64,313 5,718,535

Repayments of Assets by Line of Business

Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit

Loans Guaranteed Securities LTSPCs USDA Securities Loans LTSPCs AgVantage Total

Repayments of Assets

Agricultural Finance Rural Infrastructure Finance

Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Total

(in thousands)

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Unscheduled 434,794 60,947 397 — 496,138

September 30, 2021 $ 441,013 $ 5,659 $ 94,794 $ 118,327 $ 67,293 $ 9,204 $ 869,682 $ 1,605,972

Scheduled $ 128,126 $ 2,778 $ 39,950 $ 41,480 $ 37,991 $ 23,874 $ 476,220 $ 750,419

Unscheduled 224,072 3,417 66,680 119,145 1,652 — — 414,966

June 30, 2021 $ 352,198 $ 6,195 $ 106,630 $ 160,625 $ 39,643 $ 23,874 $ 476,220 $ 1,165,385

Scheduled $ 214,978 $ 4,362 $ 56,642 $ 48,137 $ 59,059 $ 21,092 $ 540,594 $ 944,864

Unscheduled 339,905 2,747 132,300 108,789 2,279 — — 586,020

March 31, 2022 $ 1,970,163 $ 100,427 $ 266,746 $ 7,790 $ 2,345,126

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September 30, 2020 $ 1,100,882 $ 75,527 $ 211,152 $ 279 $ 1,387,840

Scheduled $ 523,721 $ 109,543 $ 67,708 $ 240 $ 701,212

Unscheduled 448,900 50,737 3,935 — 503,572

June 30, 2020 $ 972,621 $ 160,280 $ 71,643 $ 240 $ 1,204,784

Scheduled $ 320,488 $ 94,775 $ 165,467 $ — $ 580,730

Unscheduled 326,078 8,318 — — 334,396

March 31, 2020 $ 646,566 $ 103,093 $ 165,467 $ — $ 915,126

For the year ended:

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December 31, 2020 $ 3,486,610 $ 563,858 $ 855,469 $ 1,080 $ 4,907,017

Lines of Business - Outstanding Business Volume

Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit

Loans Guaranteed Securities LTSPCs USDA Securities Loans LTSPCs AgVantage Total

Outstanding Business Volume

Agricultural Finance Rural Infrastructure Finance

Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Total

(in thousands)

September 30, 2021 $ 6,777,749 $ 60,349 $ 2,607,261 $ 2,722,702 $ 2,243,172 $ 574,255 $ 8,133,303 $ 23,118,791

June 30, 2021 6,601,205 66,008 2,388,939 2,726,909 2,246,568 533,459 7,634,073 22,197,161

March 31, 2022 $ 16,575,595 $ 1,540,760 $ 6,006,446 $ 120,609 $ 24,243,410

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September 30, 2020 14,737,485 1,646,679 5,575,841 29,283 21,989,288

June 30, 2020 14,778,474 1,509,378 5,734,694 19,562 22,042,108

March 31, 2020 14,681,403 1,390,637 5,447,470 19,802 21,539,312

On-Balance Sheet Outstanding Business Volume

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(in thousands)

September 30, 2021 $ 12,921,572 $ 2,872,499 $ 3,818,550 $ 19,612,621

June 30, 2021 11,800,429 2,878,637 4,254,625 18,933,691

March 31, 2022 $ 14,174,611 $ 2,858,521 $ 3,443,816 $ 20,476,948

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September 30, 2020 10,879,372 2,811,547 5,013,640 18,704,559

June 30, 2020 10,793,629 2,845,266 5,076,445 18,715,340

March 31, 2020 10,296,598 2,818,869 4,996,478 18,111,945

The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:

Net Effective Spread by Line of Business

Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Corporate Net Effective Spread

Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield

Net Effective Spread (1)

Agricultural Finance Rural Infrastructure Finance Treasury

Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Funding Investments Net Effective Spread

Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield

(dollars in thousands)

For the quarter ended:

September 30, 2021 (1)

$ 24,367 1.74 % $ 6,847 1.11 % $ 6,464 1.15 % $ 15,359 0.81 % $ 2,888 0.25 % $ 55,925 0.99 %

June 30, 2021 23,978 1.82 % 6,982 1.12 % 6,615 1.18 % 16,131 0.85 % 2,845 0.24 % 56,551 1.01 %

March 31, 2022 (2)

$ 30,354 1.02 % $ 7,209 1.96 % $ 3,159 0.23 % $ 375 1.69 % $ 16,738 0.28 % $ 4 — % $ 57,839 0.97 %

December 31, 2021 28,998 0.99 % 6,321 1.84 % 2,521 0.19 % 356 1.53 % 15,979 0.28 % 158 0.01 % 54,333 0.94 %

September 30, 2021 28,914 1.06 % 7,163 1.80 % 2,067 0.16 % 236 1.09 % 17,386 0.31 % 159 0.01 % 55,925 0.99 %

18,025 1.67 % 5,865 0.97 % 6,939 1.32 % 18,601 0.87 % 2,372 0.23 % 51,802 0.96 %

June 30, 2021 29,163 1.06 % 6,676 1.65 % 1,759 0.14 % 378 1.80 % 18,449 0.33 % 126 0.01 % 56,551 1.01 %

March 31, 2021 (2)

26,461 0.98 % 6,921 1.67 % 1,720 0.14 % 249 1.28 % 18,394 0.33 % 114 0.01 % 53,859 0.97 %

December 31, 2020 25,596 0.95 % 6,237 1.53 % 1,838 0.15 % 123 1.20 % 20,585 0.37 % 143 0.01 % 54,522 0.98 %

September 30, 2020 23,735 0.89 % 5,786 1.45 % 2,022 0.16 % 75 1.19 % 20,034 0.37 % 150 0.01 % 51,802 0.96 %

(1) See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by line of business to net effective spread by line of business for the three months ended September 30, 2021 and 2020.

June 30, 2020 21,597 0.83 % 4,997 1.36 % 1,701 0.14 % 47 0.93 % 19,449 0.37 % (1,322) (0.13) % 46,469 0.89 %

March 31, 2020 19,230 0.76 % 4,421 1.32 % 1,315 0.11 % 58 1.51 % 19,150 0.39 % (11) — % 44,163 0.89 %

(1) Farmer Mac excludes the Corporate segment in the presentation above because the segment does not have any interest-earning assets.

(2) See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by segment to net effective spread by segment for the three months ended March 31, 2022 and 2021.

The following table presents quarterly core earnings (a non-GAAP measure) reconciled to net income attributable to common stockholders:

Core Earnings by Quarter End

September 2021 June 2021 March 2021 December 2020 September 2020 June 2020 March 2020 December 2019 September 2019

March 2022 December 2021 September 2021 June 2021 March 2021 December 2020 September 2020 June 2020 March 2020

(in thousands)

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Guarantee and commitment fees 4,557 4,637 4,322 4,334 4,240 4,652 4,659 4,943 4,896

Gain on sale of mortgage loans — 6,539 — — — — — — —

Other 514 241 687 301 451 512 453 1,048 674

1 unchanged sentence

Credit related expense/(income):

Provision for/(release of) losses 255 (983) (31) 2,973 1,200 51 3,831 2,851 623

(Release of)/provision for losses (54) (1,428) 255 (983) (31) 2,973 1,200 51 3,831

REO operating expenses — — — — — — — — —

11 unchanged sentences

Reconciling items:

(Losses)/gains on undesignated financial derivatives due to fair value changes $ (1,864) $ (3,721) $ 1,695 $ (1,758) $ (4,149) $ 8,700 $ (6,484) $ 4,469 $ (7,117)

(Losses)/gains on hedging activities due to fair value changes (2,093) (2,097) (271) 3,827 (5,245) (2,676) (5,925) (220) (4,535)

Gains/(losses) on undesignated financial derivatives due to fair value changes $ 1,698 $ (1,213) $ (1,864) $ (3,721) $ 1,695 $ (1,758) $ (4,149) $ 8,700 $ (6,484)

Gains/(losses) on hedging activities due to fair value changes 2,024 1,476 (2,093) (2,097) (271) 3,827 (5,245) (2,676) (5,925)

Unrealized gains/(losses) on trading assets 94 (76) 36 (61) (14) 223 (258) (20) 106

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis